Table 21-2 Total Utility Derived from Various Income Levels

question 80

Essay

Table 21-2
Total utility derived from various income levels
Table 21-2 reflects the levels of total utility received from income for each of four members of a society.
a. Assume that the society has the following income distribution:
Peter - $3
Paul - $7
Mary - $5
Jane - $3
Is it possible for the government to increase total aggregate utility by redistributing income among members of society? Explain your answer.
b. Assume that the government has $19 to allocate among the four members of society. (Assume that no one has any income to start with.) If the government is interested in distributing income in a way that maximises aggregate total utility, how should it distribute the $19 of income?
c. Does Table 21-2 describe a situation characterised by diminishing marginal utility? Explain your answer.

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Definitions:

Long-Term Memories

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Long-Term Storage

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