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Age Sorting Consider a city of 200 people (100 aged and 100 young) and two neighborhoods (100 people in each). People generally prefer to live close to aged people. To draw the rent-premium curves, put the number of aged people in neighborhood A (from 50 to 100) on the horizontal axis. The premium curve of aged people is concave from below, and in a neighborhood of 100 aged people, the premium is $30. The premium curve of young people is linear, and in a neighborhood of 100 aged people, the premium is $50. The two premium curves intersect at Aged 70, with the rent premium $20. a. Draw the two premium curves. b. Integration (50 aged, 50 young) [is, isn’t] a stable equilibrium because . . . c. A mixed neighborhood (70 aged, 30 young) [is, isn’t] a stable equilibrium because. . . . d. Segregation (100 aged, 0 young) [is, isn’t] a stable equilibrium because. . . . e. Some communities have a minimum age for their residents, for example 50 years old. What is the rationale for minimum age? f. Design a policy that would generate an age-segregated community even without an explicit age limit. Show the effects of the policy on your graph.
Chapter 8, Problem 3(choose chapter or problem)
Age Sorting
Consider a city of 200 people (100 aged and 100 young) and two neighborhoods (100 people in each). People generally prefer to live close to aged people. To draw the rent-premium curves, put the number of aged people in neighborhood A (from 50 to 100) on the horizontal axis. The premium curve of aged people is concave from below, and in a neighborhood of 100 aged people, the premium is $30. The premium curve of young people is linear, and in a neighborhood of 100 aged people, the premium is $50. The two premium curves intersect at Aged 70, with the rent premium $20.
a. Draw the two premium curves.
b. Integration (50 aged, 50 young) [is, isn’t] a stable equilibrium because . . .
c. A mixed neighborhood (70 aged, 30 young) [is, isn’t] a stable equilibrium because. . . .
d. Segregation (100 aged, 0 young) [is, isn’t] a stable equilibrium because. . . .
e. Some communities have a minimum age for their residents, for example 50 years old. What is the rationale for minimum age?
f. Design a policy that would generate an age-segregated community even without an explicit age limit. Show the effects of the policy on your graph.
Questions & Answers
QUESTION:
Age Sorting
Consider a city of 200 people (100 aged and 100 young) and two neighborhoods (100 people in each). People generally prefer to live close to aged people. To draw the rent-premium curves, put the number of aged people in neighborhood A (from 50 to 100) on the horizontal axis. The premium curve of aged people is concave from below, and in a neighborhood of 100 aged people, the premium is $30. The premium curve of young people is linear, and in a neighborhood of 100 aged people, the premium is $50. The two premium curves intersect at Aged 70, with the rent premium $20.
a. Draw the two premium curves.
b. Integration (50 aged, 50 young) [is, isn’t] a stable equilibrium because . . .
c. A mixed neighborhood (70 aged, 30 young) [is, isn’t] a stable equilibrium because. . . .
d. Segregation (100 aged, 0 young) [is, isn’t] a stable equilibrium because. . . .
e. Some communities have a minimum age for their residents, for example 50 years old. What is the rationale for minimum age?
f. Design a policy that would generate an age-segregated community even without an explicit age limit. Show the effects of the policy on your graph.
ANSWER:Step 1 of 7
Given:
Aged people have a concave premium curve, and in a neighborhood of 100 elderly people, the premium is $30. In a neighborhood of 100 aged individuals, the premium for young people is linear and is $50.