Show how the lottery winning affect your budget line

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Reference no: EM13854709

You have just won $100,000 lottery. Use a diagram showing the tradeoff between leisure ( on x-axis) and goods (y-axis) for the following:

a) Show how the lottery winning affect your budget line

b) After winning the lottery you continue to work the same amount of hours every day. What is the income effect of the lottery gain?

c) Now your employer increases your hourly wage. Using the income effect form b., as well as a reasonable substitution effect, explain whether you choose to work more hours per week.

Reference no: EM13854709

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