Let there be 3 states, New South Pales (NSP), Tictoria (Tic) and Kingsland (Kng). In NSP there isonly private education, in Tictoria there is both private and public education, while in Kingslandthere is only public education. Public education is free, and provides 25 weekly hours, but it cannotbe combined with private education. In both states parents preferences over the amount ofeducation for their children (e) and the consumption of other goods (c) are expressed by the utilityu(e,c)=e@c(1-a), where 0 The goal of the analytical question is to model the potential crowding out of private education. To do,we compare the choices of parents in three different states: one where there is only privateeducation, one where there is only public education and one where both are presents. We also studyhow choices depends on parental income.

1. In NSP, how much education would a parent with l=100 buy? e*= 2. In Tic there is both private and public education, that is the parent has to decide whether to send the child to public school, where he/she would get 25 hours, or to private school, where the parents can buy as many hours of education as they want. Would the parent with 1-100 send the child to public school? {Assume that when indifferent between the two options the parents opt for public} (Y/N) 3. Now assume that in each state there are 4 different parents defined by 4 different values of I: 40, 80, 120, 160. Thus both states have the same types of parents. Parents cannot move from one state to the other. Each type of parent has 1 child. How many of the 4 children in Tictoria will go to public education? Number of children=

1. In NSP, how much education would a parent with l=100 buy? e*= 2. In Tic there is both private and public education, that is the parent has to decide whether to send the child to public school, where he/she would get 25 hours, or to private school, where the parents can buy as many hours of education as they want. Would the parent with 1-100 send the child to public school? {Assume that when indifferent between the two options the parents opt for public} (Y/N) 3. Now assume that in each state there are 4 different parents defined by 4 different values of I: 40, 80, 120, 160. Thus both states have the same types of parents. Parents cannot move from one state to the other. Each type of parent has 1 child. How many of the 4 children in Tictoria will go to public education? Number of children=

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider two groups of citizens, each group can either choose to drive x = d or to take public transport x = p. The first group, group 1, enjoys driving and has the following 3 benefit from using their car within the ULEZ area: B1(x1 = d) = 18. The second group, group 2, does not enjoy driving and has a benefit of B2(x2 = d) = 0 from driving their car. If they don’t drive, citizens can use public transport to get around. The benefit of doing so is the same for both groups: B1(x1 = p) = B2(x2 = p) = 10. Both groups drive cars that do not meet the ULEZ requirements and therefore create excessive pollution. For simplicity, we consider that pollution, and the health problems it induces, are the main cost of driving. This cost is imposed on both groups and is equal to Ci(x1 = d, x2 = d) = 10 if both groups drive, Ci(x1 = p, x2 = d) = Ci(x1 = d, x2 = p) = 5 if only one group drives and Ci(x1 = p, x2 = p) = 0 if neither group drives, where i represents either group 1 or group 2. The…
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