There are two individuals, and each is endowed with 12 units of the private good. Let U₁ = 6x +y₁, and U₂ = 6x + y₂. If g(x) = 2x² then the Samuelson condition is satisfied by x = 12. But 12 units of the public good require 72 units of the private good as input. The economy has only 24 units of the private good. What has gone wrong with our reasoning?
There are two individuals, and each is endowed with 12 units of the private good. Let U₁ = 6x +y₁, and U₂ = 6x + y₂. If g(x) = 2x² then the Samuelson condition is satisfied by x = 12. But 12 units of the public good require 72 units of the private good as input. The economy has only 24 units of the private good. What has gone wrong with our reasoning?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:There are two individuals, and each is endowed with 12 units of the private good. Let U, = 6x
+ y1, and U, = 6x + y2. If g(x) = ½x² then the Samuelson condition is satisfied by x = 12. But 12 units
of the public good require 72 units of the private good as input. The economy has only 24 units of the
private good. What has gone wrong with our reasoning?
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