Suppose there are two people, Selma and Burak, who must split a fixed income of 200. The marginal utilities of income for Selma and Burak are as follows: MUS = 600- 2*Is MUB = 600- 4*IB where IS and IB are incomes of Selma and Burak respectively. a) What is optimal distribution of income if social welfare function is additive? b) Draw the MUof Selma and Burak in the Edgeworth box and show part (a). c) What is the optimal distribution if society values only the utility of Selma? What is the optimal distribution if society values only the utility of Burak? d) This example refers to .. rationale for income redistribution and it is Pareto ....

Suppose there are two people, Selma and Burak, who must split a fixed income of 200. The marginal utilities of income for Selma and Burak are as follows: MUS = 600- 2Is MUB = 600- 4IB where IS and IB are incomes of Selma and Burak respectively. a) What is optimal distribution of income if social welfare function is additive? b) Draw the MUof Selma and Burak in the Edgeworth box and show part (a). c) What is the optimal distribution if society values only the utility of Selma? What is the optimal distribution if society values only the utility of Burak? d) This example refers to .. rationale for income redistribution and it is Pareto ....

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.10P

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