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In: Economics

Assume that an individual wins a lottery. Assume also that the individual was working before the lottery win and had no other nonlabor income before the lottery win.

Assume that an individual wins a lottery. Assume also that the individual was working before the lottery win and had no other nonlabor income before the lottery win.

a) Using the basic static model of individual labour supply, discuss both graphically and explain in your own words how the lottery win will affect the individual’s level of hours worked. Discuss all relevant effects.

b) Is it possible that the individual decides to stop working following the lottery win? In your answer discuss the concept of reservation wages and add the individual’s reservation wage before and after the lottery win to your graph.

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Rahul Sunny answered 2 years ago
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