04 Jun Question Question 1 Suppose there are 8 voters in total in a country, and the vot
Question
Question 1
Suppose there are 8 voters in total in a country, and the voters can be separated into 3 main types: type A, type B and type C. The country is going to vote on whether to spend the budget surplus from last year on healthcare, education or social security. The preferences of the three types of voters are in the following table:
Type A
Type B
Type C
Healthcare
Social Security
Education
Education
Education
Healthcare
Social Security
Healthcare
Social Security
e.g. Type A voters want the government to spend money on healthcare the most.
There are 3 type A voters, 3 type B voters and 2 type C voters in the country. What will be the voting outcome if the voting method is
a) pair-wise majority voting?
b) Borda voting?
c) Runoff voting?
Question 2
Consider a setting where three individuals: Al, Bob and Charlie are to choose a restaurant to eat lunch at. Al prefers a restaurant where lunch can be had for $5.00, Bob favors a bit better fare at a restaurant serving $10.00 lunches, and Charlie wants a gourmet restaurant where lunch will cost around $20.00.
Suppose they are going to do a series of pairwise majority voting on which restaurant to go, and there are 20 restaurants that offer lunch from $1, $2,…, $19 and $20 in the area. Which restaurant will they go? For convenience assume that, given any two options, each member of the lunch group prefers restaurants with prices closer to their preferred restaurant to ones that are farther from it.
Question 3
The town of Greenville has three families, each with one child, and each of which earns $20,000 per year (pre-tax). Each family is taxed $4,000 per year to finance the public school system in the town, which any family can then freely attend. Education spending is $6,000 per student in the public schools. The three families differ in their preferences for education. Though families A and B both send their children to the public school, family B places a greater value on education than family A. Family C places the greatest relative value on education and sends its child to private school.
a) Graph the budget constraints facing each of the three families and draw a possible indifference curve which could correspond to the choice each family makes.
b) The town is considering replacing its current system with a voucher system. Under the new system, each family would receive a $6,000 voucher for education, and families would still be able to send their children to the same public school. Since this would be more costly than the current system, they would also raise taxes to $6,000 per household to pay for it. Draw the budget constraint the families would face under this system.
c) Suppose that, when the new system is introduced, family A continues to send their child to public school, but family B now sends their child to private school (along with family C’s child). Explain how you know that family C is made better off and family A is made worse off by the voucher policy.
d) Show, using diagrams, that family B could be made better or worse off by the voucher policy.
Question 4
When you called her last night, your grandmother confided that she is afraid to sell her home because doing so will affect her OAS and GIS benefits. According to what you have learnt in class, what will you say to her about how her benefits will change when she sells her house?
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