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QUESTION
Consider two workers with identical preferences, Brian and Ian.
- Consider two workers with identical preferences, Brian and Ian. Both have the same life cycle wage path—in other words, they face the same wage at every age and they know what their future wages will be. Leisure and consumption are both normal goods.
- Compare the life cycle path of hours of work for Brian and Ian if Brian receives an unexpected inheritance at age 35.
- Next, compare the life cycle path of hours of work for Brian and Ian if instead Brian has always known that he will receive (and, in fact, does receive) a one- time inheritance at age 35.
- Next, compare the life-cycle path of hours of work for Brian and Ian if instead Brian receives an unexpected wage increase at age 35.
