Question

I really do not understand how to explain aggregate willingness to pay. This question on my homework is throwing me through a loop.

Suppose you want to determine the aggregate willingness to pay among students at your school or employees at your employer for increasing recycling at the school or workplace. How might you do this?

Can someone explain aggregate willingness to pay

Then how to relate this back to the homework questions.

Answer 1

In economics willingness to pay can be defined as, money that a group or an individual is planning to pay, as policy changes without creating any trouble. Whereas aggregate willingness to pay can be described as the maximum sum of amount that anyone is willing to pay for needed goods and services. Or it can also be said as, maximum amount of sum paid willingly to avoid a loss.

ublic goods are non-rivalrous, so everyone can consume each unit of a public good. They also have a fixed market quantity: everyone in society must agree on consuming the same amount of the good. However, each individual’s willingness to pay for the quantity provided may be different. The individual demand curves show the price someone is willing to pay for an extra unit of each possible quantity of the public good.

The aggregate demand for a public good is the sum of marginal benefits to each person at each quantity of the good provided. The economy’s marginal benefit curve (demand curve) for a public good is thus the vertical sum all individual’s marginal benefit curves. The vertical summation of individual demand curves for public goods also gives the aggregate willingness to pay for a given quantity of the good.