Consider the model of household sorting into communities with different levels of public goods. Suppose community 1 (the one with a higher level of public good provision) decided to lower taxes, decreasing gross-of-taxes housing prices.

All else equal, what happens to the income cutoff as a result of the lower taxes? What sort of movement do you expect as people start voting with their feet? Explain in the context of the model.

Part (a) asked you to identify the "first order effect", holding all else equal. But what about the long run? Do you expect this change to be self-limiting or self-reinforcing? Explain thoroughly.