Have Your Folks Given You Cash Or Promised To Leave You Money After They Re Gone If So Your Parents May Think Of Such 1 (46.21 KiB) Viewed 16 times
Have Your Folks Given You Cash Or Promised To Leave You Money After They Re Gone If So Your Parents May Think Of Such 2 (68.68 KiB) Viewed 16 times
Have your folks given you cash or promised to leave you money after they're gone? If so, your parents may think of such gifts as a good. They must decide whether to spend their money on fun, food, drink, cars, or on transfers to you. Hmmm Altonji and Villanueva (2007) estimate that, for every extra dollar of expected lifetime resources, parents give their adult offspring between 24 and 3¢ in bequests and about 3¢ in transfers. Those gifts are about one-fifth of what they give their children under 18 and spend on college. Illustrate how an increase in your parents' income affects their allocations between bequests to you and all other goods ("fun") into two related graphs, where you show an income-consumption curve in one and an Engel curve for bequests in the other. Suppose income increases from Yz, represented by budget line L', to Yz, represented by budget line L 1.) Using the point drawing tool, indicate the optimum bundle with income of Y4. Label this bundle 'e' 2.) Using the point drawing tool, indicate the optimum bundle with income of Y2. Label this bundle 'ey.' 3.) Using the line drawing tool, graph the income-consumption curve. Label this 'Income-consumption curve. Carefully follow the instructions above, and only draw the required objects.
2 Other goods 12 Bequests
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