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Guildford Borough Council has decided to extend the swimming lanes of Guildford Lido. The borough council plans to finance the extension from contributions of two types of individuals: Ordinary residents of Guildford (R) and students at the University of Surrey (S), temporarily resident in Guildford. R and S have a utility function over private goods and the total number of additional swimming lanes (L), of the form: Ui (xi,L) = (xi-3)(L-4) The total number of additional swimming lanes, is the sum of the number of swimming lanes funded by each type of individuals, ordinary residents and student residents: L = ls + lr . Ordinary residents have an income of £11 and students have an income of £5. Both, the private good and using a swimming lane have a price of £1. How many swimming lanes will be built if Guildford Borough Council does not intervene? How many are paid for by both types of individuals, the ordinary residents and student residents?

Sagot :

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