A social planner must allocate income between two people, A and B, in a mini-economy. A produces more utility than B from the same income. The utility possibilities set for A and B would be curved, showing greater total utility when more income is given to A. A Rawlsian social welfare function would allocate most income to the worse off (B), while a Utilitarian function would allocate more to A to maximize total utility for both individuals. The two approaches can lead to different allocation outcomes due to their different philosophical views of fairness.
Suppose there is a minieconomy with two people A and B A s.pdf
1. Suppose there is a mini-economy with two people A and B. A social planner has some income to
allocate between them. (a) Suppose A is a "better utility producer" than B. Assume both people
only care about their own allocation. Draw a plausible utility possibilities set for the two people and
explain briefly two important features of the shape you have given it. [8] (b) Use your part (a)
diagram to illustrate what a RawIsian and a Utilitarian social welfare function would choose as the
social optimum. [6] (c) Describe and explain the reasons for any differences between the two
outcomes you showed in part (b). [6]
![Suppose there is a mini-economy with two people A and B. A social planner has some income to
allocate between them. (a) Suppose A is a "better utility producer" than B. Assume both people
only care about their own allocation. Draw a plausible utility possibilities set for the two people and
explain briefly two important features of the shape you have given it. [8] (b) Use your part (a)
diagram to illustrate what a RawIsian and a Utilitarian social welfare function would choose as the
social optimum. [6] (c) Describe and explain the reasons for any differences between the two
outcomes you showed in part (b). [6]](https://image.slidesharecdn.com/supposethereisaminieconomywithtwopeopleaandbas-230321044055-32434fca/85/Suppose-there-is-a-minieconomy-with-two-people-A-and-B-A-s-pdf-1-320.jpg)
