Lucy, a college student at Iowa State University, earns $20 per hour working at a Cafe. Her parents also give her $200 per week to help with her expenses. Lately, her parents have been concerned about her grades & want her to spend less time at work & more time studying. To encourage Lucy to spend less time at work, her parents consider two possibilities:

Plan A: Reduce her weekly allowance by $10 for every hour that she works.

Plan B: Increase her weekly allowance from $200 to $300 per week.

The graph below shows Lucy’s original budget constraint assuming she can work a maximum of 70 hours per week.

Now sketch Lucy’s weekly budget constraint after the implementation of Plan A.

a) After how many hours of Lucy working at the cafe will she NOT be getting any allowance from her parents?

b) If she spends no time at the cafe and all of her time at home, how much income will she earn per week?

c) Assuming she is still getting some amount of money from her parents, on net, how much additional income will she have by working at the Cafe for an additional hour?

d) When she is no longer receiving any allowance from her parents, how much additional income will she by working at the Cafe for an additional hour?

e) If she spends no time at home and all of her time at work, how much income will she earn per week?

Transcribed Image Text:

1400 2001 70 time at home 1400 2001 70 time at home

Answer rating: 100% (QA)

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