Violating a Core Economic Assumption
Consider an economic model with one lender and three active borrowers, where each borrower's project generates a total output of 1. The lender receives an identical share, 's', from each borrower, and each borrower retains the remainder (1-s). A key assumption for this model is that the lender must be the highest-earning individual. Construct a specific numerical example (by choosing a value for 's') where this assumption is violated. Show the resulting incomes for the lender and a single borrower to justify your example.
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Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
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