Question 2 Suppose that there is a group of four individuals who have utility functions u(y) = where y is income. Suppose that the social welfare function has no intrinsic preference for inequality and that the income distribution is y = {1, 1, 9, 9}. (a) (b) Draw the Lorenz curve associated with this income distribution and illustrate a measure of in- equality using your graph. l4 marks] Suppose that the government intervenes and equalizes income in the economy. i) At what equal level of income per capita is total utility the same as with {1, 1, 9,9}? [4 marks] ii) How does this government intervention impact average income? [3 marks] iii) What does your answer to (ii) tell us about the welfare consequences of income redistri- bution? [4 marks] Suppose the utility of the two individuals with an income of 9 is now My} = 6V? with 6 > 1. i) Does this alter the case for equalising incomes? [5 marks] ii) Discuss how different criteria might be used to justify redistribution even when 6 is high. [5 marks]