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

Question

On the basis of the three individual demand schedules below, and assuming these three people are the only ones in the society, determine (a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good. Responses go into the gray shaded cells.

Individual #1 Individual #2 Individual #3 (a) Private Demand (b) Public Demand Price Qd Price Qd Price Qd Price Qd Amount Society is Willing to Pay Qd $16 1 $16 1 $16 1 $16 1 14 2 14 2 14 2 14 2 12 3 12 3 12 3 12 3 10 4 10 4 10 4 10 4 8 5 8 5 8 5 8 5 6 6 6 6 6 6 6 6 4 7 4 7 4 7 4 7 2 8 2 8 2 8 2 8

Explanation / Answer

For a private good, the collective demand is sum of individual quantity demanded at each price.

But for a public good, private individuals are not willing to pay for a public good since the government provides for it.

Therefore:

Individual 1 Individual 2 Individual 3 Private demand Public demand Price Qd Price Qd Price Qd (1) (2) (3) (1) + (2) + (3) Price Qd 16 1 16 1 16 1 3 0 1 14 2 14 2 14 2 6 0 2 12 3 12 3 12 3 9 0 3 10 4 10 4 10 4 12 0 4 8 5 8 5 8 5 15 0 5 6 6 6 6 6 6 18 0 6 4 7 4 7 4 7 21 0 7 2 8 2 8 2 8 24 0 8

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