Consider an economy with 1,000 people and two goods, one private and one public. The people all have the same utility function Ui(Xi, G) = Xi – 100/G , where Xi is the quantity of the private good consumed by person i and G is the quantity of the public good. The price of the private good

Consider an economy with 1,000 people and two goods, one private and one public. The people all have the same utility function Ui(Xi, G) = Xi – 100/G , where Xi is the quantity of the private good consumed by person i and G is the quantity of the public good. The price of the private good

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Question

Consider an economy with 1,000 people
and two goods, one private and one public.
The people all have the same utility
function Ui(Xi, G) = Xi – 100/G, where Xi is
the quantity of the private good consumed
by person i and G is the quantity of the
public good. The price of the private good
is 1 and the price of the public good is 10.
Each person has a total income of 1,000O.
Find the Pareto efficient amount of G in this
economy.

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