Imagine That Three City Council Members Are Trying to Decide $\succ$

question 21

Multiple Choice

Imagine that three city council members are trying to decide how to spend a surplus. The options currently being debated are (i) spend it on improving primary education in the municipality, (ii) spend it on improving the level of medical care offered by the local hospital, or (iii) lower local taxes and use the surplus to cover the costs of existing programs. The council employs majority rule to make its decisions. The councillors have the following preference orderings over the spending choices:
Councillor 1: Education $\succ$ Medical $\succ$ Tax cut
Councillor 2: Medical $\succ$ Tax cut $\succ$ Education
Councillor 3: Tax cut $\succ$ Education $\succ$ Medical
Assume that the councillors hold a round-robin tournament that pits each alternative against every other alternative in a series of pair-wise votes. The winner is the alternative that wins the most contests. Based on this information, answer the following four questions.
-Which of the outcomes, if any, is a Condorcet winner?

• A) education
• B) medical
• C) tax cut
• D) there is no Condorcet winner in this example

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Definitions:

Tax Schedules

Detailed tables or charts provided by tax authorities that dictate the tax rate applied to different levels of taxable income or expenditure.

Economy

An area of the production, distribution, and trade of goods and services by different agents in a particular geographic region.

Ability-to-pay Taxation

A principle of taxation based on the belief that taxes should be levied according to an individual’s or entity’s capacity to pay, reflecting their income or wealth.

Progressive Tax Structure

A tax system in which the tax rate increases as the taxable amount increases, typically designed to distribute the tax burden more heavily on those with higher incomes.