Assume that all individuals have identical preferences but some individuals are wealthier than others. Assume there is a single public good and a single private good.
a. Show diagrammatically how you derive the demand curve for the public good, as a function of the tax price charged the individual.
b. Assume that the demand function is of the form

where k is a constant (less than 1), Y is income, and p is the tax price. This says that when income doubles the demand for public goods doubles, but when the tax price doubles the demand is cut in half. If the tax price is proportional to the individual's income (as with proportional taxation), how will demand for public goods differ among those with different incomes?

Transcribed Image Text:

G = kY Р