Answered step by step
Verified Expert Solution
Question
1 Approved Answer
In Famland, there are two types of individuals: active; sedentary. While the active individuals like to exercise in facitilities provided by the city (such as
In Famland, there are two types of individuals: active; sedentary. While the active individuals like to exercise in facitilities provided by the city (such as parks, swimming pools, etc. . ., in other words, a public good), the sedentar}r individuals give lower importance to those goods. Both individuals consume two goods: facilities to excercise (f); all other private goods (g). The utility function for active individuals is U = f3'l5g2'5 whereas the utility function for sedentary individuals is Us = f 1" 5 g\" 5. Considering that the income of both individuals are the same $200 and that the prices are pf : $1 and pg : $2, what would he the optimal allocation? Interpret your
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started