Question

1. A million dollar lottery winner decides to quit working. How can you explain this behavior using economics?

2. How does outsourcing affect wages and unemployment in the short run and the long run?

Answer 1

A MILLION DOLLAR LOTTERY WINNER:

• One person win the lottery and he decide the quit the work.
• Because the lottery increase the income that's why he decide the quit the work.
• The money income of the individual, which increases his purchasing power.
• when the income is increase , the purchasing power also increase, the power would contribute to an increased demand for leisure, due to the income effect.
• The lottery money contributing towards an increase in income of the individual, leisure would become less costly in terms of the time that had to be invested to earn the same income.
• The substitution effect doesn't influence the decision to quit.