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Suppose the market demand for a good consists of two consumers, 1 and 2, where their respective individual demands are: D1(p) = 200 - 5p and D2(p) = 100 - p. Note that demand cannot be negative, so what we really mean is D1(p) = max{200 - 5p,0} and D2(p) = max{100 - p,0}.
(a) On one diagram graph the individual demand curves as well as the resulting market demand curve. Mark the intercepts correctly.
(b) Suppose supply is given by p = 30, that is, the supply is perfectly elastic. Find the amount purchased by each consumer. Illustrate answer with a graph.
(c) Now, suppose instead the supply is given by q = 20. Find the equilibrium market price. Illustrate answer with a graph.
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