- Question 1 12 Points Consider The Market For A Good That Has 6 Buyers Each Buyer Has The Same Income I Let Q Denote 1 (35.6 KiB) Viewed 8 times
Question 1 [12 points] Consider the market for a good that has 6 buyers. Each buyer has the same income $I. Let q denote the amount of the good and m the money left after buying the good. Buyers 1,2,3 have the same utility function u₁ = 12q-q+m. Buyer 4 has the utility function u4 = 20q-q² + m. Buyers 5,6 have the same utility function us = 28q-q² + m. Denote the price of the good by p. (a) [4 points] Observe that each buyer has the same income $I. Determine I should be at least how large to ensure that for every buyer, the income $/ is adequate to purchase its desired amount of the good at any price p. For (b)-(c), assume income SI is such that for every buyer, the income is adequate to purchase its desired amount of the good at any price p. (b) [4 points] Solving utility maximization problem, for each buyer find the individual demand. (c) [4 points] Determine the numerical value of the market demand Q for price p = 18.