DSQ/eco

Suppose a school is getting more money from the State for school supplies, including textbooks and computers, as well as an extra budget to use for after-school tutoring. The parents of children at the school hear the news and are planning their budget this year for how much to spend on their children’s education, as well as the amount of effort to put in helping their children learn.

Using the language of substitutes and complements, describe how you think the improvements in school finances and expenditure on supplies and after-school tutoring will affect the parents’ allocation of time and money for their children’s education. Consider also how parents’ preferences, parents’ utility functions, and household time and budget constraints affect choices regarding how parents might choose to invest in their children’s education.