Suppose the market for cars has two segments, businesses and home users. The demand curve for cars by businesses is P = 40 – 4Qb, where Qo is the quantity of cars de- manded by businesses with the price is P. The demand curve for cars by home users is P = 24-2Qh, where Qh is the quantity of cars demanded by home users when the price is P. Both businesses and home users will never demand negative amounts of cars, so for sufficiently high prices, the demand will be 0. (a) Graph the demand curves for each segment, and draw the market demand curve for cars. (b) Write the equation for the demand curve for all prices P > 0 (make sure that it matches with part (a)). (c) When the price is P = $12, what is the consumer surplus for businesses, home users, and the market as a whole.
Suppose the market for cars has two segments, businesses and home users. The demand curve for cars by businesses is P = 40 – 4Qb, where Qo is the quantity of cars de- manded by businesses with the price is P. The demand curve for cars by home users is P = 24-2Qh, where Qh is the quantity of cars demanded by home users when the price is P. Both businesses and home users will never demand negative amounts of cars, so for sufficiently high prices, the demand will be 0. (a) Graph the demand curves for each segment, and draw the market demand curve for cars. (b) Write the equation for the demand curve for all prices P > 0 (make sure that it matches with part (a)). (c) When the price is P = $12, what is the consumer surplus for businesses, home users, and the market as a whole.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.13P
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Transcribed Image Text:3. Suppose the market for cars has two segments, businesses
and home users. The demand curve for cars by businesses
is P =
40 – 4Qb, where Qb is the quantity of cars de-
manded by businesses with the price is P. The demand
curve for cars by home users is P = 24–2Qh, where Qh is
the quantity of cars demanded by home users when the
price is P. Both businesses and home users will never
demand negative amounts of cars, so for sufficiently high
prices, the demand will be 0.
m
(a) Graph the demand curves for each segment, and
draw the market demand curve for cars.
(b) Write the equation for the demand curve for all
prices P > 0 (make sure that it matches with part
(a)).
(c) When the price is P = $12, what is the consumer
surplus for businesses, home users, and the market
as a whole.
Tev
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