Consider Alexei who makes $1,400 per week and just won a ‘set for life’ lottery ticket which involves a fortnightly paym
Posted: Fri Apr 29, 2022 10:45 am
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.
‘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.