ECONOMICS 1010 B
PROBLEM # 6
J. Allen
Fall, 2006
The market consists of three people, George, Martha and Lo. The following are the demand curves for
Good X for George, Martha, and Lo:
G
P
8
7
6
5
4
3
M
Q
1
2
3
4
5
6
P
6
5
4
3
L
Q
1
2
3
4
1.
If X is a private good, find the market demand curve.
2.
Given the supply curve:
P
9
8
7
6
5
4
P
10
9
8
7
6
5
4
3
Q
1
2
3
4
5
6
7
8
Qs
12
11
10
9
8
7
Find equilibrium P and Q . How much revenue are the firms making?
If X is a pure public good, find the market demand curve. (Note, this is now of the form, To Get:
Q , People are willing to pay: P .)
Describe what makes X public.
Given the supply curve:
P
20
18
16
14
12
Qs
4
3
2
1
0
find equilibrium P and Q .
How much revenue are the firms making?
Martha announces that X is of no value to her, so she won’t pay anything. What is equilibrium P
and Q ?
Is it possible Martha would do this? Use your understanding of the equilibrium of utility for Martha
in your discussion.