EC302: MICROECONOMIC ANALYSIS
SEMESTER 1 2012
Worksheet 4
1.
Three voters A, B and C will decide by majority rule whether to pass bills on issues X
and Y. Each of the two issues will be voted on separately. The change in net benefits (in
$) that would result from passage of each bill is as follows:
Voter
X
Y
A
+6
3
B
1
+4
C
2
3
a.
Which issues (if any) would pass if decided by majority vote? Is this the efficient
outcome?
b.
Which issues (if any) would pass if logrolling were allowed? Would logrolling
improve efficiency? Would it result in efficient outcome?
c.
Suppose that it were legal for one voter to pay another to vote a certain way.
Would allowing such side payments improve efficiency from part (b)? Would it
result in efficient outcome?
d.
What amount of side payments would take place if paying for votes were
allowed?
(RG Page 134 Question No 3)
2.
Assume that the demand curve for milk is given by Q = 10010P, where
P is the price
of milk per liter and Q is the number of liters demanded per year. The supply curve is
horizontal at a price of $2.
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 Summer '12
 GyaneshwarRao
 Microeconomics, Supply And Demand, Democracy, efficient outcome, Median voter theorem

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