Question

In: Economics

1. Suppose we have two consumers in the market. Joe has the following demand curve: P=10-Q1....

1. Suppose we have two consumers in the market. Joe has the following demand curve: P=10-Q1. Lucy has the following demand curve: P=10-3Q2. Find (algebraically) the formula for the market (or aggregate) demand curve. Draw all 3 curves on 3 separate graphs that should be drawn next to each other (so I can see the horizontal summation of quantities).

Solutions

Expert Solution

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Consumer 1 Demand

P=10-Q1

Q1 = 10 - P

Consumer 2 Demand

P= 10- 3Q2

3Q2 = 10 - P

Q2 = 10/3 - P/3

Market Demand = Q1 + Q2

Q1 + Q2 = 10 - P + 10/3 - P/3

Q1 + Q2 = 10 + 3.3333 - P - 0.3333P

Q1 + Q2 = 13.3333 - 1.3333P

P = (13.3333 - Q1 - Q2)/ 1.3333

P = 10 - 0.75Q1 - 0.75Q2

Price Consumer 1 Consumer 2 Market
0 10 3.3333333 13.33333
1 9 3 12
2 8 2.6666667 10.66667
3 7 2.3333333 9.333333
4 6 2 8
5 5 1.6666667 6.666667
6 4 1.3333333 5.333333
7 3 1 4
8 2 0.6666667 2.666667
9 1 0.3333333 1.333333
10 0 0 0


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