Question: 1. 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

1. 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.

2. Is the lottery a fair way to allocate economic resources? Discuss, referring to both of the following: • procedural judgements of fairness • substantive judgements of fairness

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