oe and Ann have incomes of 10, 000and250,000, respectively. And, each has the following
utility function, a measure of individual welfare:
u = income0.5
Ex. total utility at an income level of $100,000 is 316.23 (= 100, 000.5)
How much does Joe’s and Ann’s utility change by if, due to a government redistri-
bution program, $10,000 of Ann’s income is redistributed to Joe? Please show your
work. 5pt
Does this re-allocation improve or diminish social welfare under the conditions of a
utilitarian welfare function? A Rawlsian welfare function? Please show your work
and provide an economic rationale for your answer. 5pt
Does this reallocation represent a Pareto improvement? Explain. 5pt