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The town of Khatmal has two citizens: a rich citizen (R) and a poor one (P). It has a road that leads to wwwwww the neig

Posted: Sun Jun 05, 2022 4:49 pm
by answerhappygod
The Town Of Khatmal Has Two Citizens A Rich Citizen R And A Poor One P It Has A Road That Leads To Wwwwww The Neig 1
The Town Of Khatmal Has Two Citizens A Rich Citizen R And A Poor One P It Has A Road That Leads To Wwwwww The Neig 1 (177.63 KiB) Viewed 49 times
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The town of Khatmal has two citizens: a rich citizen (R) and a poor one (P). It has a road that leads to wwwwww the neighbouring town; however, this road needs to be cleaned everyday, otherwise ash from the neighbouring thermal power plant settles on the road and makes it impossible to use it. Cleaning the road costs 1/- every day. R has to go to work in the neighbouring town and has to use this road, whereas P works in Khatmal and therefore do not use this road much. The daily income of R is 15/- wwwwwwwwwww and that of P is 10/-. Let x denote the private good consumed by each citizen and m denote the amount of cleaning service provided. The cost of the private good is also 1. The utility functions of the two citizens are given by: UR = ln xR + 2lnm; Up = ln xp + Inm I Font Set up the maximization problems for R and P. Let me and mp denote the amount of road cleaning demanded by R and P, respectively. Without doing any math, describe whether you expect me and mp to be equal or different, and give two reasons for your answer. b. Solve mathematically for me and mp. What is the resulting utility of R and P? What is therefore the social surplus in the economy?