[ad_1]
Consider a city of 200 people (100 rich and 100 poor) and two neighborhoods (100
people in each). Both groups generally prefer to live with rich people and are willing to
pay a premium for living with a fraction of rich people that is larger than 50%. Poor
people’s premium curve is given as �!””# = 2�$, where x is the percentage of rich above
50% (e.g., if there are 52% rich, x will be 2). Rich people’s premium curve is given by
�%&'( = 60� − 0.4�$.
a) What is the equilibrium outcome (i.e., what is the share of rich and poor people,
respectively). Explain.
b) Calculate the premium to be paid at the equilibrium.
Sample Solution
The post Segregation vs. Integration appeared first on acestar tutors.
[ad_2]
Source link