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(1) Segregation vs. Integration Consider a city of 200 people (100 rich and 100 poor) and two neighborhoods (100 people in each). Both groups generally

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(1) Segregation vs. Integration Consider a city of 200 people (100 rich and 100 poor) and two neighborhoods (100 people in each). Both groups generally prefer to live with rich people and are willing to pay a premium for living with a fraction of rich people that is larger than 50%. Poor people's premium curve is given as 330m, = onggywhere x is the percentage of rich above 50% (e.g., if there are 52% rich, x will be 2). Rich people's premium curve is given by 531th : _5th1 _ QEWhat is the equilibrium outcome? Explain. Set both premium curves equal 29 = _5;._?. 0h15?Rearrange to a? _ -53; 0- Solve for x applying the quadratic equation 69: 'bi \"\"2\"\". Here a=1, b=-35 and ' 2a 1,}- 2 C=0'9E?=35i 35 2=_5 2 2 That is , the curves intersect at 88.89%. To the left of 88.89% the rich outbid the poor, to the right the poor outbid the rich. That is 88.89% rich is the equilibrium point

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