Optimal provision for a Public Good
So a homework question so just hints would be appreciated.
we have each persons utility function as Ui = AaiBi
Solve for optimum level of the public good, both goods cost £1/unit
Ok do you use Lagrangian?
Do you need to express it in the set function way as in ui[Aa1+Aa2,(yi - Aai)/p]
or do you already have the expression you need?
Thanks,
Josh
we have each persons utility function as Ui = AaiBi
Solve for optimum level of the public good, both goods cost £1/unit
Ok do you use Lagrangian?
Do you need to express it in the set function way as in ui[Aa1+Aa2,(yi - Aai)/p]
or do you already have the expression you need?
Thanks,
Josh
For the optimal level for a single individual you need to set the marginal rate of substitution equal to the ratio of the marginal costs, for the socially optimal level you need to set the sum of the marginal rate of substitutions equal to the ratio of marginal costs. You could use lagrange multiplier, but it's not really necessary. Some simple partial differentiation should do the trick
Posted from TSR Mobile
Posted from TSR Mobile
(edited 10 years ago)
Original post by js93
For the optimal level for a single individual you need to set the marginal rate of substitution equal to the ratio of the marginal costs, for the socially optimal level you need to set the sum of the marginal rate of substitutions equal to the ratio of marginal costs. You could use lagrange multiplier, but it's not really necessary. Some simple partial differentiation should do the trick
Posted from TSR Mobile
Posted from TSR Mobile
Thanks, this helped, do you have an equation for that second bit?
Something like..
Summation MRSi = p2/p1 ?
Ahh i think it's Samuelson Condition.
Original post by Mr. Inquisitive
Thanks, this helped, do you have an equation for that second bit?
Something like..
Summation MRSi = p2/p1 ?
Something like..
Summation MRSi = p2/p1 ?
That is correct.
Quick Reply
Related discussions
- Hello all, i have a question for my assignment and i need help to figure it out.
- 5 ways how AI is improving cloud computing
- Is it time for change - is the status quo about to end challenged?
- Pharmacist Alternatives
- How to perform Search Engine Optimisation for my website (SEO)
- lnat essay feedback
- Is This EPQ Topic Suitable/"academic" ?
- Answering Questions: What can a degree in Business Management lead to?
- Public International Law Problem Question Structure
- Is this is Good EPQ Title:
- Should you be able to call yourself a Barrister?
- Is the UK prepared for WW3?
- Judicial Review Problem Question
- Judicial Review Problem Question
- Finance, Investment banking, and Accountancy
- Foundation course application
- BTEC H/S Care Unit 4: Enquiries into Current Research in Health and Social Care
- Good site of SEO
- BTEC H&S Care Unit 12: Supporting Individuals with Additional Needs Work Explained
- Kallisto's Sunday Question: Era
