Suppose you win a lottery, and your after-tax gain is $40,000 per year until you retire. As a result, you decide to work part time at 32 hours per week in your old job instead of the usual 40 hours per week.
a) Calculate the annual income effect on hours worked from this lottery gain based on a 50-week year.
b) What is the substitution effect on hours worked associated with this lottery win? Explain.