In: Accounting
1. Inverse demand function for the other town residents: Demand function is Qr = 400-2p
or 2p = 400-Qr
or p = 200-0.5Qr
Thus inverse demand function for the other town residents is p = 200-0.5Qr
2. When p is $300 then Qc = 400-p = 400-300 = 100.
Thus at price of $300 college students will buy 100 firewood.
Other town residents will not buy any firewood at this price point as their quantity demanded will be = 400-(2*300) = -200. As demand will not be negative it will be considered as nil.
Let the price at which quantity demanded by other town residents is zero be "x". Thus 0 = 400-2x
or 2x = 400 . Thus x = 200
So, the price at which quantity demanded by other town residents is zero is $200
3. The total demand curve will be based on the demand function for college students and demand function for other residents. The resulting demand curve will be:
In the above chart the x axis represents the quantity demanded and the y axis represents the price