Suppose there are 1,000 voters in New Hyde. A total of 400 are willing to pay up

Question

Suppose there are 1,000 voters in New Hyde. A total of 400 are willing to pay up to $25 each for the construction of a Park, whereas the other 600 are willing to pay only $10. The construction of the Park will cost $12,000. Someone proposes a vote on whether to tax each citizen $12 in order to finance the Park.

(a) What will be the result according to the median voter model? Is this result socially efficient? Explain.

(b) What if instead of beign willing to pay up to $25 each, the 400 residents are willing to pay up to $50 each?

Explanation / Answer

a> The median voter theorem states that "a majority rule voting system will select the outcome most preferred by the median voter" Since the majority of the voters likes to pay $10, thus the median voters will also pay $10. So, The voting result will be NO.

Yes, it is socially efficient as taxing $12 from the 600 voters will have a loss of utility of ($12-$10)=$2

b> The result will not change as the median voter will remain the same, thus the result will remain the same.

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