Answer to Question #264152 in Microeconomics for Mim

Question

Describe how one may use the Median Voter Theorem to derive a demand curve for a public good. Also discuss the problems that may arise and the solutions to these in implementing this procedure.

Answer 1

Median Voter Theorem to derive a demand curve for a public good;

Median voter theorem uses aggregate cross sectional data to identify a relationship between public goods expenditure levels and a community’s median income. As a result, the data may be used to construct a graph of expenditure levels against the community's income level and the points are used to draw and derive a demand curve. A point on the demand curve shows the expenditure level of a citizen in the community that has the median income.

Problems that may arise and the solutions to these in implementing this procedure.

The key assumption that the median voter is also the voter with the median income has been repeatedly challenge and demonstrations made where the pivotal voter has an income that lies below the median.

Nearly all empirical studies that utilize the median voter theorem suffer from the problem of measuring the actual services demanded by voters. The vast majority of studies use community-level expenditures to conclude a relationship between the median voter’s preferences for publicly provided services and outcomes of the political process.

Preferences may not be single peaked when voters have preferences over multiple issues or when private alternatives exist.

The solution to these problems may be the use of the mean income instead of the the median income in evaluating the demand of the public good.