Inequality aversion in a social welfare function

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Provide short answers to the following questions.

(a) Inequality aversion in a social welfare function is essentially reflected in the way how utility of one person or group is traded for that of the other. While weighting their utilities helps to shift the priorities somewhat it does not alter the fundamental approach to such trade. Are these statements true or false? Explain your conclusions.

(b) Assume two normal and ordinary goods A and B. If the good A is taxed and its compensated demand is constructed around the customer after tax utility level, would the excess burden due to tax on A from the customer's compensated demand be greater or less than her deadweight loss from her ordinary (uncompensated) demand? Use the effects to explain.

Reference no: EM132461415

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