Question
. Consider the following Becker-Murphy model for a city with two neighborhoods (A and B).There are 100 high income households and 100 low income households
. Consider the following Becker-Murphy model for a city with two neighborhoods (A and B).There are 100 high income households and 100 low income households in the city.Each neighborhood has 100 identical dwellings.
a. Explain the basic assumption that lies behind the upward slopes of both curves in the graph.
b. Where are the equilibria for this model? Explain.
c. For each equilibria explain what the income composition of neighborhood B will be.
d. Using the data from ( c ) , calculate the value of the income dissimilarity index in this city at each equilibria.
e. Which equilibria if any are stable?Explain.
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