The Table Below Reflects the Levels of Total Utility Received

question 214

Essay

The table below 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 maximizes aggregate total utility,how should it distribute the $19 of income?
c.
Does the table above describe a situation characterized by diminishing marginal utility? Explain your answer.

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Definitions:

Deposited

The action of placing money into a financial account or institution for safekeeping or to earn interest.

Compounded Annually

Interest calculation on the principal and the accumulated interest once a year.

Annual Payments

Payments made once every year towards a debt or investment.

Future Value

The value of an asset or sum of money at a specific future date, calculated by applying expected rates of growth or interest.