Final answer:
An individual's full income with a $5 hourly wage and 8,000 available hours is $40,000. If they choose to devote 75% of their income to leisure, they will work 2,000 hours, resulting in $10,000 income from work.
Step-by-step explanation:
When calculating an individual's full income, we must consider the total potential earnings if all available hours within a year were devoted to work. Given that an individual has a market wage of $5 per hour, and assuming there are 8,000 hours in a year, the individual's full income would be the market wage multiplied by the total hours available, which is $5 x 8,000 = $40,000. This value represents the potential earnings without any time allocated for leisure or other non-working activities.
However, if the individual chooses to allocate 75 percent of their time to leisure, only the remaining 25 percent will be available for work. Since 75 percent of 8,000 hours is 6,000 hours, that leaves 2,000 hours (8,000 - 6,000) for working hours. At $5 per hour, working 2,000 hours would result in an income generated from work of $10,000 (2,000 hours x $5 per hour).
This scenario illustrates an important concept in economics known as the labor-leisure trade-off. When planning how to allocate time between labor and leisure, individuals must consider how each additional hour spent on leisure results in one less hour of potential earnings, and vice versa. Making these decisions involves considering the opportunity cost of forgoing work to enjoy leisure, as well as the personal utility gained from either activity.