Interactive Session 5

Question 1

how do we determine an equilibrium in assymetric information labour signalling

Answer 1

see if anyone has an incentive to deviate by working out the ent benefit of all their actions

Question 2

how to find gov bc?

Answer 2

tax revenue = expenditure = public good value

sub this into the individual utility, and income is now m(1-t)

Question 3

How do we find values of y for which an individual is worse off from gov. provision

Answer 3

find dU/dt then find when y leads to less than 0 inequality

then solve

Question 4

how to find values of y for when a consumer is better off from gov provision

Answer 4

same as worse off beut set to be over 0

Question 5

how to find values for y when total utility is improve by gov provision

Answer 5

set up function for total utility (Ua + Ub)

do differntial again and find when it is over 0

Question 6

what does Ya + Yb indicate

Answer 6

Sum of total utilities is constant as t varies, hence you can redistribute utility using tax while preseving the sum of total utility

will use maximum taxation if inequality averse since total welfare increases