Q5 people 100 white and 100 black and two neighborhoods 100

Q5. people (100 white and 100 black) and two neighborhoods (100 prefer to live close to white people. To draw the rent-premium curves, Consider a city of 200 people in each). People generally put the number of white in for black and white households inverted Ua rent-premium curve of black hou people, the premium rent gap is S0 neighborhood A (from 50 to 100) on the horizontal axis. The premium curve s is an inverted U and the rent premium curve of white lies above the sehold along the specified range In the neighborhood of all white a) Draw the two premium curves and identify the integration and segregation equilibrium points. b) s integration a stable equibrium? ? If yes, why and if no, then why? Explain your answer precisely. c) Suppose government e subsidy to the black household to live in neighborhood A. what will provid happen to the rent premium of black people? Suppose after subsidy. the premium curve for black household lie above the white curve population in the range 50-60, but below the white curve for a larger white population. integration or segregation or mixed equilibrium? Are they stable? Why? Explain precisely help of diagram for a white Do you find with the d)

Solution

Integration and Segregation
Consider a city of 200 people (100 tall and 100 short) and two neighborhoods (100 people in each). People generally prefer to live close to short people. To draw the rent-premium curves, put the number of short people in neighbor­hood A (from 50 to 100) on the horizontal axis. The premium curve of tall people is concave from below, and in a neighborhood of 100 short people, the premium is $30. The premium curve of short people is linear, and in a neighbor­hood of 100 short people, the premium is $50. The two premium curves intersect at S = 70 and premium = $20.
a. Draw the two premium curves.
b. Integration (50 short, 50 tall) [is, isn’t] a stable equilibrium because . . . .
c. A mixed neighborhood (70 short, 30 tall) [is, isn’t] a stable equilibrium because . . . .
d. Segregation (100 short, 0 tall) [is, isn’t] a stable equilibrium because . . . .