Question

For each of the following policy changes, explaim why the change is or is not likely to be a Pareto improvement.
a) Building a park, financed by an increase in the local property tax rate
b) Building a park, financed by the donatiom of a rich philanthropist
c)Increasing medical facilities for lung cancer, financed out of a general revenues
d)Increasing medical rate facilities for lung cancer, finances out of an increase in the cigarette tax

Answer 1

Answer:

Given

Some policy changes.

why the change is or is not likely to be a Pareto improvement is explained as below:

Pareto improvement:
Pareto improvement refers to allocate the resources that make one individual better off without making any individual worse off.

a) Building a park, financed by an increase in the local property tax rate:

Building a park, financed by an increase in the local property tax rate is not a Pareto improvement, because here, one party is better off by worse off other party.

The party, on which the tax is imposed, is worse off.

It is a social function.

b) Building a park, financed by the donation of a rich philanthropist:

park financed by donation of rich philanthropist is an example of pareto improvement because

1. It will reduce the pollution of atmosphere and hence improving air quality. It will reduce the cost of medicine for citizens.
2. It will be used for recreational purposes, this will help is increasing productivity of people as they will feel more energized and refreshed.

For the above reason, it can be concluded that the improvement is pareto improvement.

c) Increasing medical facilities for lung cancer, financed out of a general revenues:

Increased medical facilities for lung cancer, fmanced out of general revenues is Pareto improvement.

Here, one party is better off without worsening off other party.

It is a social function.

d) Increasing medical rate facilities for lung cancer, finances out of an increase in the cigarette tax:

Increasing medical care facilities for lung cancer, fmanced out of an increase in the cigarette tax is not a Pareto improvement.

It is a compensation function.