Labor Economics · intermediate
What moves on the Labor-Leisure Tradeoff diagram
Cutting non-labour income shifts the budget line in without changing the price of leisure: a pure income effect that raises work hours and lowers consumption.
The starting point includes some non-labour income supporting consumption.
The government cuts welfare payments.
The budget line drops in parallel; the wage is untouched.
A pure negative income effect: leisure falls (hours worked rise) and consumption falls. Whether that trade is worth it is politics, not economics.
Examiners ask this as: welfare cut, benefits reduced, austerity, payment cut, safety net trimmed.
Other scenarios on Labor-Leisure Tradeoff