ECON 260 Chapter Notes - Chapter 3: Itap, Psoc, Pus
12 Nov 2012
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Chapter 3 textbook analytical problem answers: the individual demand curves represent the maximum amount of water that each individual is willing to purchase at a given price. Rearrangement to isolate price gives the maximum price each individual is willing to pay (marginal willingness to pay; mwtp) for the qth unit. For a quantity of 4 units per individual, mwtp for alvin is , while mwtp for betty is. Total wtp for alvin is the area under his marginal wtp curve from qda =0 to. Students may need to be reminded that the area of a square is base height, while the area of a triangle is (base height)/2. mwtpa. Qa: to get the aggregate demand for alvin and betty, add up the quantity demanded at a given price (horizontal aggregation). The demand curve is kinked, the kink is at a price of , where alvin purchases 5 and betty purchases 0.
