a) Assuming each household is making its separate purchase decision, find the market demand function for streetlights for all 25 households b) Assuming each household is making its separate purchase decision, find the equilibrium price and number of streetlights in the community

a) Assuming each household is making its separate purchase decision, find the market demand function for streetlights for all 25 households b) Assuming each household is making its separate purchase decision, find the equilibrium price and number of streetlights in the community

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose 20 households in a community have the demand function Q = 2-0.001P each for
streetlights while 5 other households have the demand function Q = 3 - 0.002P each for
streetlights. Here, Q refers to the number of streetlights to erect near their home while P is the
unit price of each streetlight. The cost of building each streetlight is GHS 45.
a) Assuming each household is making its separate purchase decision, find the market
demand function for streetlights for all 25 households
b) Assuming each household is making its separate purchase decision, find the
equilibrium price and number of streetlights in the community
c) Assuming a community association has decided to coordinate this streetlight purchase
decision problem. The community leader uses the demand functions to determine how
much each household is willing to contribute (willingness to pay) towards the first,
second, third, etc streetlight. The first light is purchased only when the sum of
individual households' contributions is at least equal to the marginal cost of streetlights.
Find out how many streetlights are purchased for this community in equilibrium

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