Homework Answers
Answer : Without externalities :
When P = $40,
Q1 = 80 - (0.50 * 40) = 60
When P = $30,
Q2 = 85 - (0.50 * 30) = 70
Changes in quantity demanded without externality = Q2 - Q1 = 70 - 60 = 10.
Therefore, due to price change without externality the quantity demanded is increased by 10 units.
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