Think About the Demand for Lottery. What Are the Main Factors Determining Demand for Lottery? Please Explain Clearly Why and How Each Factor Should Affect the Demand. Can a Government Distract People from Its Political

Topics: Poverty, Lottery, Economics Pages: 2 (418 words) Published: May 25, 2013
Demand for the lottery mainly increase due to higher overall expected return with very low investment. However, there are other main factors determining demand for lottery. These are 1. cost effective price 2. poverty rate 3. unemployment rate and 4. country's developing stage.

1. Cost Effective Price : The price of the lottery ticket has been constant for years and it's very low investment compare to the big return rate. The buyers' non- financial opportunity costs are so low per purchase. The buyers' psychological cost of hoping to win is low because of the low price of lottery ticket.

2. Poverty Rate : A high poverty rate can also increase the demand of lottery tickets. Poor will more likely jump at any chance at radically improving their circumstances. For them, any chance is probably better than having no chance.

3. Unemployment Rate : When the unemployment rate is high, lottery becomes one of the most promising way to transform the people life situations. Greater percentage of income has been spent on lottery product at people with lower income level.

4. Country's developing stage : For the developing and under developing countries, there are more people with lower education and improper tax systems. Inadequate education will have positive effect on lottery ticket buying. People with no mathematical skill will turn to buy more tickets since they can't relate that the probability of winning is very low. they can't make informed decision and turn to rely on chances. Improper tax systems will also increase lottery demands. For example, in Myanmar, when people make a purchase on land or houses, they have to declare the source of their payment. Nevertheless people always tend to under declare their income and their taxes. They use their lottery winnings which is tax free income to adjust their income declaration. (Note: I am not sure it applies in any other developing countries.)

Yes. A government can distract people from its political problems...
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