Define level of public goods supplied by the consumers

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Reference no: EM131774198

Question: Suppose there are two consumers, labeled 1 and 2, each of whom has a dollar of money income which can be spent on either private good x or public good g. Assume that the dollar cannot be divided between the two goods. That is, each consumer must either spend her whole dollar on the private good or spend it all on the public good. The utility function of each consumer i is given by U_i = x_i + ß(g₁ + g₂ ). If ß < 1, what do you expect to be the level of public goods supplied by the two consumers? Suppose ß= 1. How does your answer change?

Reference no: EM131774198

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