Question

Linda and I decided to survey all of our neighbors regarding lobster dinners. It turns out that there are two distinct groups of people in our neighborhood with different preferences for lobster. Group A really likes lobster, while Group B prefers steak. The individual continuous demand curve for each member of Group A is P-60-10Q and there are 100 people in this group. The individual demand curve for each member of Group B is P-30-10Q and there are 200 people in this group. a. 4 poi° Graph the aggregate demand curves for Group A and Group B (two graphs). b. (4 points)* Graph the aggregate demand curve for the entire neighborhood (one graph). c. (6 points)-If the price of lobster dinners is $25, how many dinners will be consumed by the entire neighborhood? How many will be consumed by Group A and how many will be consumed by Group B? d. (4 points) Is Group A's demand for lobster dinners more or less elastic than Group B's demand? Is this the result you expected? Why or why not?

Answer 1

Gr.A p = 60 minus 10 Q N = 100 = minus p + 60/10 = Q = Aggregate demand curve for Gr A be Q^A_T Q^A_T = Q_1 + Q_2 + --- + Q_100 = 60 minus p/10 + 60 minus p/10 + --- 60 minus p/10 = Q^A_T = 100 (60 minus p/10) = Q^A_T = 10(60 minus p) = Q^A_T = 600 minus 10 p Aggregate demand curve for Group A be Q^A_T = 600 minus 10 p \r\n Gr.B p = 30 minus 10 Q = minus p + 30/10 = Q Aggregate demand curve for Gr.B be Q^B_T = Q_1 + Q_2 + --- + Q_200 = 30 minus p/10 + == + 30 minus p/10 = Q^B_T = 200 (30 minus p/10) = Q^B_T = 600 minus 20 p = Q^B_T not equal to 20 p = 600 (b) Aggregate demand curve for Entire neighborhood be Q_T = Q^A_T + Q^B_T