In a market there are two consumers. Each consumer has a demand curve of P = 10–0.5q. What is the market demand curve?
Question
In a market there are two consumers. Each consumer has a demand curve of
What is the market demand curve?
Solution
The market demand curve is derived by summing the individual demand curves of the two consumers.
Given the individual demand curve P = 10 - 0.5q for each consumer, we can express quantity demanded by each consumer as a function of price: q = 20 - 2P.
Since there are two identical consumers in the market, the total quantity demanded in the market at each price level is the sum of the quantities demanded by each consumer. Therefore, the market demand curve is Q = 2q = 2(20 - 2P) = 40 - 4P.
So, the market demand curve is P = 10 - 0.25Q.
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