Question

2.    Allocating Land in Desirable Communities: MLS    

Consider a city that has vacant land (6,000 square feet of space) ready for development in a neighborhood that is desirable because of its superior schools. There are two types of households, low income ( L) and high income ( H ). Each L is willing to pay $40,000 to live in the neighborhood, and each H is willing to pay $60,000. The preferred lot size is 1,000 square feet for type L , compared to 3,000 square feet for type H .    

a.   If there are no restrictions on lot sizes, the vacant land will be allocated to type [ L, H ] because. . . .    

b.   Suppose the city sets a minimum lot size. The vacant land will be allocated to type H if the minimum lot size is at least   _____ square feet because. . . .    

Answer 1

Solution:

In a city people want to get a place where they can get every facilities. For such kind of place people paid more if they belong low-income group

a)

if there are no restrictions on lot sizes ,the vacant land will be allocated to type (L,H) because as there is no limitation for land .so That if H is willing to pay $60,000 for 3000 square feet and L is willing to pay$40,000 for 1000 square feet then low-income group pays more than high-income group then most lands goes to the low-income group.

b)

Suppose the city sets a minimum lot size.the vacant land be allocated to type H.if the minimum lot size is at least 3000 square feet because H is willing to pay$60,000 for 3000 square feet land and if it depends on money then the high-income group paid more and wants to more square feet land for their living