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.
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.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter6: Consumer Choices
Section: Chapter Questions
Problem 12RQ: Why does a change in income cause a parallel shift in the budget constraint?
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Question 9 | [ 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.
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