a. On the basis of the three individual demand schedules below, and assuming the

Question

a. On the basis of the three individual demand schedules below, and assuming these three people are the only ones in the society, determine the collective demand schedule on the assumption that the good is a public good.

a. On the basis of the three individual demand schedules below, and assuming these three people are the only ones in the society determine the collective demand schedule on the assumption that the good is a public good Instructions: Ehter your answers as whole numbers Demand Public Good Individual #3 Individual #2 Individual #1 Qd Qd Price Price $16 14 12 10 Qd Price $16 14 12 10 Price Qd $16 12 4 4 4 10 4 4 b. Use the public demand schedule above and the following supply schedule to ascertain the optimal quantity of this public good Quantity Supplied Price $18 16 14 12 10 6 Optimal quantity

Explanation / Answer

(a)

(b) Optimal quantity is where quantity demanded equals quantity supplied . Therefore, optimal quantity is 6 units.

Demand Public good Price Quantity demanded (12+16+16) = 44 1 (10+14+14)= 38 2 (8+12+12)= 32 3 (6+10+10) =26 4 (4+8+8) = 20 5 (2+6+6) = 14 6 (4+4) =8 7 (2+2)=4 8

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