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In: Economics

Consider the market for a good in which there are two income groups of buyers. There...

Consider the market for a good in which there are two income groups of buyers. There are 10 buyers with income $28 and 8 buyers with income $36. All buyers have the same utility function u = 16q − q2 + m, where q denotes the amount of the good and m the money left after buying the good. Denote the price of the good by p.

(a) For each income group, determine the individual demand of a buyer.

(b) Find the market demand and draw the demand curve.

(c) Consider an individual buyer in income group $28. For the following prices, determine how much money is left with the buyer after buying the good: (i) p = 7, (ii) p = 10.

(d) Consider an individual buyer in income group $36. For the following prices, determine how much money is left with the buyer after buying the good: (i) p = 7, (ii) p = 10.

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Expert Solution

Rahul Sunny answered 1 year ago
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