What is the optimal distribution of income

Reference no: EM131490490

Question: Suppose there are only two people, Simon and Charity, who must split a fixed income of $100. For Simon, the marginal utility of income is MUs = 400 - 2Is while for Charity, marginal utility is

MUc = 400 - 6Ic

where le, I, are the amounts of income to Charity and Simon, respectively.

a. What is the optimal distribution of income if the social welfare function is additive?

b. What is the optimal distribution if society values only the utility of Charity? What if the reverse is true? Comment on your answers.

c. Finally, comment on how your answers change if the marginal utility of income for both Simon and Charity is constant:

MUc = 400 MUs = 400

Reference no: EM131490490

Questions Cloud

Microscope depends on the wavelength of the photon : The resolving power of a microscope depends on the wavelength of the photon used to examine the object that is observed.

Is it consistent with utilitarianism : I dont care how rich the very rich are. I care if they became rich in an unethical way, or if they use their riches in a particularly cringer or revolting way.

What is principle remaining on the loan : Suppose you take out a loan for $24,475 to purchase a 2016 Nissan Altima. what is the principle remaining on the loan?

Find the masses of the fragments : The particle decays into two fragments that fly off with velocities of 0.982c and -0.852c, respectively. Find the masses of the fragments.

What is the optimal distribution of income : Suppose there are only two people, Simon and Charity, who must split a fixed income of $100. For Simon, the marginal utility of income is MUs = 400 - 2Is.

Weekly payment plan have less total cash outflow each? year : Why does the weekly payment plan have less total cash outflow each? year?

What went wrong in the revenue cycle : These questions are: What went wrong in the revenue cycle? How would you suggest rectifying this issue

Moving past the ground observer : What would the period of oscillation be (as measured by the same observer) if the mass and spring were moving past the ground observer at a speed of 0.600c?

Entry when conan collects the principal and total interest : Prepare the 12/31/12 adjusting entry and the entry when Conan collects the principal and total interest on 6/30/13.

User Account

All Pages