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.

Instructions: Enter only whole numbers in the table below.

Individual #1		Individual #2		Individual #3		Demand Curve - Private Good		Demand Curve - Public Good
Price	Qd	Price	Qd	Price	Qd	Price	Qd	Amount Society is Willing to Pay	Qd
$16	1	$16	0	$16	1	$16		$	1
14	2	14	0	14	2	14			2
12	3	12	0	12	3	12			3
10	4	10	1	10	4	10			4
8	5	8	2	8	5	8			5
6	6	6	3	6	6	6			6
4	7	4	4	4	7	4			7
2	8	2	5	2	8	2			8

Answer 1

a) For private good, add the quantity demanded by 3 individuals at every price. For example, when the price is $16, total quantity demanded is 1 + 0 + 1 = 2 units. For a price of $8, the total quantity demanded is 5 + 2 + 5 = 12 units.

b) For public good, add the price to be paid by 3 individuals at every unit. For example, when the quantity demanded is 1, total willingness to pay is 16 + 10 + 16 = $42. For 5 units, the total willingness to pay is 8 + 2 + 8 = $18

Individual #1		Individual #2		Individual #3		Demand Curve -		Demand Curve -
						Private Good		Public Good
Price	Qd	Price	Qd	Price	Qd	Price	Qd	Amount Society is	Qd
								Willing to Pay
16	1	16	0	16	1	16	2	42	1
14	2	14	0	14	2	14	4	36	2
12	3	12	0	12	3	12	6	30	3
10	4	10	1	10	4	10	9	24	4
8	5	8	2	8	5	8	12	18	5
6	6	6	3	6	6	6	15	12	6
4	7	4	4	4	7	4	18	8	7
2	8	2	5	2	8	2	21	4	8