Consider the case of two school districts in a state that uses a power equalization school aid formula as described in equation (19.10). The state has set V* = 200,000. Alpha district has property value per resident Vα =150,000 and expenditure per pupil of Eα = 6,000. Beta district has property value per resident Vβ = 400,000 and expenditure per pupil of Eβ = 9,000.
a. Compute the state aid that each district will receive per pupil.
b. Explain the economic effects provided each district by the school aid formula.