Scenario 21-2
Lawrence has recently graduated from college with a degree in journalism and economics. He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Lawrence is typically awake for 112 hours each week (he sleeps an average of 8 hours each day). For each hour Lawrence spends writing, he can earn $75. Lawrence is such a good writer that he can get paid for as many hours of writing as he chooses to work.
-Refer to Scenario 21-2. If Lawrence decides to spend 80 hours a week playing volleyball on the beach and the rest of his time writing, how much income will he have available to spend on consumption goods?

Question

Quizplus · Accepted Answer

The number of hours Lawrence spends writing each week can be found by subtracting the hours spent playing volleyball from the total number of hours in a week:

Total hours in a week = 24 hours/day x 7 days/week = 168 hours/week
Hours spent playing volleyball = 80 hours/week
Hours available for writing = 168 hours/week - 80 hours/week = 88 hours/week

Lawrence's weekly income can be found by multiplying the number of hours spent writing by his hourly rate:

Weekly income = 88 hours/week x $75/hour = $6,600/week

Since Lawrence is awake for 112 hours each week and spends 80 hours of that time playing volleyball, he has 32 hours of free time each week. Assuming Lawrence chooses to save all of his earnings and not spend any on consumption goods, he would have $6,600/week x 4 weeks/month = $26,400/month available to spend. However, if he chooses to spend some of this money on consumption goods, his available income would be lower.

To calculate Lawrence's available income if he chooses to spend some of his earnings on consumption goods, we need to know what percentage of his income he plans to save. Let's assume Lawrence plans to save 75% of his income and spend the other 25% on consumption goods.

Amount saved each week = $6,600/week x 75% = $4,950/week
Amount available for consumption goods = $6,600/week x 25% = $1,650/week

To find the monthly amount available for consumption goods, we need to multiply the amount available each week by the number of weeks in a month:

Amount available for consumption goods each month = $1,650/week x 4 weeks/month = $6,600/month

Therefore, Lawrence would have $6,600/month available to spend on consumption goods if he spends 80 hours/week playing volleyball and saves 75% of his writing income. Answer choice C is the closest option at $2,400.

Scenario 21-2 Lawrence Has Recently Graduated from College with a Degree in Degree