Exercise 5: Aggregate Demand and Consumers' Surplus There are three types of consumers. Demand for the first group of consumer is d₁ (p) = 4 demand for the second consumer group is d₂ (p) = demand for the third consumer group is d3 (p) 60-3p if p < 20 0 otherwise 100-2p 0 if p < 50 otherwise 200-5p 0 if p < 40 otherwise 1. Find the aggregate demand function, D(p) = d₁ (p) + d₂ (p) +d3(p). 2. Draw the graph of the aggregate demand function D(p) and clearly mark all important points. Follow the convention in economics and put quantity on the horizontal axis and price on the vertical axis. 3. For the aggregate demand function, D(p), that you found in part 1, find the corresponding inverse aggregate demand function, P(Q). 4. What is the marginal social value of the 90-th unit of the good, MSV (90)? 5. What is the social value of Q = 90 units of the good, SV (90)?
Exercise 5: Aggregate Demand and Consumers' Surplus There are three types of consumers. Demand for the first group of consumer is d₁ (p) = 4 demand for the second consumer group is d₂ (p) = demand for the third consumer group is d3 (p) 60-3p if p < 20 0 otherwise 100-2p 0 if p < 50 otherwise 200-5p 0 if p < 40 otherwise 1. Find the aggregate demand function, D(p) = d₁ (p) + d₂ (p) +d3(p). 2. Draw the graph of the aggregate demand function D(p) and clearly mark all important points. Follow the convention in economics and put quantity on the horizontal axis and price on the vertical axis. 3. For the aggregate demand function, D(p), that you found in part 1, find the corresponding inverse aggregate demand function, P(Q). 4. What is the marginal social value of the 90-th unit of the good, MSV (90)? 5. What is the social value of Q = 90 units of the good, SV (90)?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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How do I do question 5? Please help.
Transcribed Image Text:Exercise 5: Aggregate Demand and Consumers' Surplus
There are three types of consumers. Demand for the first group of consumer is d₁ (p)
demand for the second consumer group is d2 (p)
demand for the third consumer group is d3 (p)
=
=
60-3p
0
if p < 20
otherwise
100-2p if p < 50
0
otherwise
200-5p
0
if p < 40
otherwise
1. Find the aggregate demand function, D(p) = d₁ (p) + d2 (p) +d3(p).
2. Draw the graph of the aggregate demand function D(p) and clearly mark all important points. Follow
the convention in economics and put quantity on the horizontal axis and price on the vertical axis.
3. For the aggregate demand function, D(p), that you found in part 1, find the corresponding inverse
aggregate demand function, P(Q).
4. What is the marginal social value of the 90-th unit of the good, MSV (90)?
5. What is the social value of Q = 90 units of the good, SV (90)?
6. If the good is sold at a per-unit price of p = 30, what is the (aggregate) consumers' surplus and how
is consumption split between the three groups of consumers?
7. If the good is sold at a per-unit price of p = 10, what is the consumers' surplus and how is it split
between the three groups?
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