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Consider an economy with N population. Assume Y i is the indi- vidual income and T i is the tax paid by each of N
Consider an economy with N population. Assume Y i is the indi- vidual income and T i is the tax paid by each of N members of society. Tax revenues are used to finance a public good G and the price for each unit of Gis$1. TheutilityfunctionforeachindividualiisUi =(YiTi)(1)G with 0 < < 1.
- If we can use the majority voting to find the outcome G, calculate the outcome G?
- Assume Ti = Yi. Find outcome G as a function of mean income, Y , and using the majority voting outcome. )
- When income is uniformly distributed, which outcome is closest to the efficient outcome? What is the main element that the efficient level of provision is dependent on? )
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