Question

Suppose the market was made up of two demanders. Demander 1 has a demand function given by: qD = 10 - 5P. Demander 2 has a demand function given by: qD = 80 - 20P. The horizontal summation of these two demand functions will, when graphed, have a kink (point where the slope changes). Determine the price associated with the kink in the total demand function. (Do not include a dollar sign in your response. Round to the nearest 2 decimal places if necessary.)

Answer 1

The two demand curves for demander 1 and 2 are aD-10-5P and aD-80-20P. The horizontal summation of the two curves, along with the horizontal summation curve (highlighted in black) is plotted below: 5 Qd-90-25P 10-5P Qd-80-20P -60 -40 -20 20 40 60 80 100 Demander 1 Demander 1Market demand Since Y-axis shows the price and X-axis shows the quantity, there is a kink at the price equal to S2