microeconomics The demand functions of individual A and B for a public good (G) is given by:PA = 500-2G&PB = 200 -0.8Gwhere, P = price offered by each individual (RM) and G = units of public goods. Suppose themarginal cost (MC) to produce G is constant, RM250.a. Derive the aggregate demand equation for the above public good. b. Sketch all the information provided above in the diagram below. [Note: Show all the demandand marginal cost functions in detail]Harga / Price800600400200O100200300Kuantiti / QuantityG* =c. Calculate the total quantity of public goods produced assuming no free riders are present(G*). Show this result in the above diagram.unit(s)

Public good has two features : Non Rival and Non-excludable. the consumption of public good by one…

The demand functions of individual A and B for a public good (G) is given by: PA = 500-2G & PB = 200- 0.8G where, P = price offered by each individual (RM) and G = units of public goods. Suppose the marginal cost (MC) to produce G is constant, RM250. 1. Derive the aggregate demand equation for the above public good.

The demand functions of individual A and B for a public good (G) is given by: PA = 500-2G & PB = 200- 0.8G where, P = price offered by each individual (RM) and G = units of public goods. Suppose the marginal cost (MC) to produce G is constant, RM250. 1. Derive the aggregate demand equation for the above public good.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter4: Markets In Action

Section: Chapter Questions

Problem 19SQ

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Consider two consumers with the following demand functions for a public good. P1 = 10 - 0.1G P2 = 20 - 0.1G where P1 is the price that person 1 is willing to pay for quantity G and P2 is the price that person 2 is willing to pay for quantity G What is the optimal level of the public good if the marginal cost of the public good is Ksh. 25. What is the total cost of producing the optimal quantity how much does each person contribute towards the cost
First consider a public good of value to Ann and Bob with the property that the value of the good can be expressed in monetary terms. In this case, the Samuelson condition states that the efficient level of the good is determined by MV +MVP where p is the per unit price of the good, and, for example, MV is Ann's marginal value of the good. Now consider a public good of value to Ann and Bob, the value of which CANNOT be expressed in monetary terms. In this case А a. We need more information before we can know how to modify the Samuelson condition. b. The Samuelson condition is of no use because we cannot compare Ann's utility to Bob's. Ⓒc. The price must be replaced with a relative price, and the marginal values must be replaced with the corresponding Marginal Rates of Substitution. d. The Samuleson condition continues to work as in the case where values CAN be expressed in monetary terms.
The demand functions of individual A and B for a public good (G) is given by: PA = 500-2G & PB = 200 -0.8G where, P = price offered by each individual (RM) and G = units of public goods. Suppose the marginal cost (MC) to produce G is constant, RM250. a. Derive the aggregate demand equation for the above public good. b. Sketch all the information provided above in the diagram below. [Note: Show all the demand and marginal cost functions in detail] Harga / Price 800 600 400 200 100 200 300 Kuantiti / Quantity c. Calculate the total quantity of public goods produced assuming no free riders are present (G*). Show this result in the above diagram. d. Calculate the prices to be paid by individuals A (PA) and B (PB), respectively. e. Calculate the total quantity of public goods produced (G) assuming individual B is a free rider.
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