There are two people in an economy.Person A's demand for a public good is Q = 10 - P and person B's demand is Q = 20 - 2P.The highest total that A and B will be willing to pay for six units of the public good is

Question

Quizplus · Accepted Answer

To find the highest total that A and B will be willing to pay for six units of the public good, we need to find the price each is willing to pay for the sixth unit and sum those amounts. For person A, setting Q = 6 in their demand equation (Q = 10 - P) gives 6 = 10 - P, solving for P gives P = 4. For person B, setting Q = 6 in their demand equation (Q = 20 - 2P) gives 6 = 20 - 2P, solving for P gives P = 7. The total highest amount they are willing to pay for the sixth unit is 4 (from A) + 7 (from B) = $11.

There Are Two People in an Economy