Question
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
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 Alexeis 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 Alexeis weekly consumption. Illustrate on the same diagram Alexeis 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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