Examine the graphs of demand for schooling presented in Figure 19.1.
a. Explain how per-capita income is taken into account in the analysis.
b. What is the effect on welfare losses due to an enforced uniform level of schooling in the two districts if per-capita income in the districts is relatively large?
c. Using a graph, explain how economies of scale would lead to lower costs per pupil and provide an incentive for the two districts to consolidate.