Assume that there are two income groups. Group A57 has high income and Group M94 has low income. Assume the both projects yield the following net gains, as outlined below, to the high and low income groups. Note: some projects positively affect one group and adversely affect another.
Project Benefit group A57 Benefit Group M94 net social benefits (benefits are in thousands)
A.............. 2.................0
B...............8................-2
C.............12................-8
D..............-3.................2
E...............-1...............-1
F................4...............-6
a.) Which projects should be undertaken using standard Cost-benefit Analysis?
b.) If higher income individual's net benefits are given a weight of 1 and lower income individuals are given a weight of 2 and what would the net social benefit to each group be? Which projects would be undertaken given the new weighting system?