Question 9 | [10 marks, max 200 words] Consider Alexei who makes $1,400 per week and just won a ‘set for life’ lottery t
Posted: Wed Apr 27, 2022 12:22 pm
Question 9 | [10 marks, max 200 words] Consider Alexei who makes
$1,400 per week and just won a ‘set for life’ lottery ticket which
involves a fortnightly payment of $10,000 for 20 years. Currently
he works 35 hours per week. Now do the following:
• Illustrate the effect of the lottery win on Alexei’s budget
constraint using a fully labelled diagram where i) the horizontal
axis represents the hours of free time per week, and ii) the
vertical axis represents Alexei’s weekly consumption.
• Illustrate on the same diagram Alexei’s optimal decisions
before and after the lottery win along with his indifference
curves.
• Based on your diagram, discuss whether Alexei will quit his
job.
$1,400 per week and just won a ‘set for life’ lottery ticket which
involves a fortnightly payment of $10,000 for 20 years. Currently
he works 35 hours per week. Now do the following:
• Illustrate the effect of the lottery win on Alexei’s budget
constraint using a fully labelled diagram where i) the horizontal
axis represents the hours of free time per week, and ii) the
vertical axis represents Alexei’s weekly consumption.
• Illustrate on the same diagram Alexei’s optimal decisions
before and after the lottery win along with his indifference
curves.
• Based on your diagram, discuss whether Alexei will quit his
job.