A decision-maker believes that each member of the community derives utility from their income according to the

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A decision-maker believes that each member of the community derives utility from their income according to the following formula:

U = αYβ

where U = annual level of utility Y = annual income level

α = 1

β = 0.5.

The average level of income in the community is $1800 per annum. Given the above information, what income distributional weights should be placed on net benefits accruing to individuals at the following income levels (in each case briefly explain your answer):

i annual income = $1800;

ii annual income = $200;

iii annual income = $7200.

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Cost Benefit Analysis

ISBN: 9781032320755

3rd Edition

Authors: Harry F. Campbell, Richard P.C. Brown

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