individuals seek their own satisfaction or utility and that people often decide to try a little less of one thing and

a little more of another. If we accept these assumptions, then the idea of utility-maximizing households facing

budget constraints becomes highly plausible.

CLEAR IT UP

Does who controls household income make a difference?
In the mid-1970s, the United Kingdom made an interesting policy change in its “child allowance” policy. This

program provides a fixed amount of money per child to every family, regardless of family income. Traditionally, the

child allowance had been distributed to families by withholding less in taxes from the paycheck of the family wage

earner—typically the father in this time period. The new policy instead provided the child allowance as a cash

payment to the mother. As a result of this change, households have the same level of income and face the same
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