The following data depict the fiscal characteristics of two school districts in a metropolitan area, each composed of identical single-family houses with one pupil per household.

The voters who have chosen to live in each district desire educational expenditures of $5,000 per pupil. Each district then finances education with a property tax, but because the Spartan District has small houses (with low value) while the Wolverine District has large houses (with high value) the tax rate in the Wolverine District is much higher.
a. Would a voter in the Spartan District prefer to live in a small house ($50,000) in the Wolverine District? (Assuming that the tax rate is unchanged at 2%) Explain.
b. Suppose there is a third district, Buckeye District, to choose from with an equal number of big and small houses so that per-pupil value is $150,000. What tax rate is required in Buckeye District in order to spend $5,000 per pupil on education? If small houses cost $50,000 in this district, are small house consumers better off here or in Spartan District? If big houses cost $250,000 in this district, are big house consumers better off here or in Wolverine District? Explain.
c. Given your answer in part b, what do you expect will happen to the demand for big and small houses in Buckeye District? What will happen to the prices of these houses in this mixed district?

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Wolverine School District $250,000 290 S5,000 Spartan School Characteristic per-pupil property value 50,000 property tax rate per-pupil expenditure District 10% S5,000