Consider Laura 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 she works 35 hours per week. Do the following: 1. Illustrate the effect of the lottery win on lauras 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 lauras weekly consumption. 2. Illustrate on the same diagram lauras optimal decisions before and after the lottery win along with his indifference curves. 3. Based on your diagram, discuss whether Laura will quit her job.
Consider Laura 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 she works 35 hours per week. Do the following: 1. Illustrate the effect of the lottery win on lauras 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 lauras weekly consumption. 2. Illustrate on the same diagram lauras optimal decisions before and after the lottery win along with his indifference curves. 3. Based on your diagram, discuss whether Laura will quit her job.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider Laura 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 she works 35 hours per week. Do the following:
1. Illustrate the effect of the lottery win on lauras 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 lauras weekly consumption.
2. Illustrate on the same diagram lauras optimal decisions before and after the lottery win along with his indifference
3. Based on your diagram, discuss whether Laura will quit her job.
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