The neighborhood of Humboldt Park has been through many changes, starting off mainly as a community of people of Northern European decent, and later of Latin American decent, many of whom speak Spanish. The neighborhood continues to go through changes, with some areas seeing an inflow of mainly English-speaking, higher-income residents.

a. Name a potentially positive externality (or reduction of a negative one) from having more higher-income residents in the neighborhood from the point of view of existing residents.

b. Name a potentially negative externality (or reduction of a positive one) from having more higher-income residents in the neighborhood from the point of view of existing residents.

c. An older Puerto Rican family has moved to the suburbs, but still owns a house in Humboldt Park, which now has two apartments. Seeing that rents in the area are going up, they raise the rent from $800 to $1000 a month.

i.In one of the units, the existing resident, Ignacio, decides to stay and pay the extra $200. Is the higher rent that Ignacio pays a negative externality?

li. In the other unit, the existing resident, Carlos, decides that the rent is too high and moves to another neighborhood while rents are the same. A new resident, Joanna, pays $1,000 for Ignacio's old apartment. Is Joanna exerting a negative externality on Carlos?

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a One potentially positive externality from having more higherincome residents in the neighborhood f... View the full answer