Question

Every house in a small town has a well that provides water at no cost. However, if the town wants more than 14,000 gallons a day, it has to buy the extra water from firms located outside of the town. The town currently consumes 9,000 gallons per day 10-1 Using the data above, draw the supply and demand curves as precisely as possible. Focus on accurately indicating the key points of the curves, but for the rest, it is sufficient to be qualitatively accurate. For example, there is not enough information to plot the vertical intercept of the demand curve but you should be able to draw the curve with the proper slope and accurately indicate the equilibrium price and quantity. 1.) Use the line drawing tool to draw the inear demand curve in the figure to the right. Label this line 'D. 2.) Use the multipoint curved line drawing tool to draw the market supply curve, which includes the supply from the town's wells. Label this curve'S Carefully follow the instructions above, and only draw the required objects. 6,000 9,000 12,000 15,000 Q. gallons of water per day 18,000 After plotting the final point of your multipoint curve, press the Esc key on your keyboard to end the line.

Answer 1

Quantity demanded by the town currently is constant and fixed at 9000 gallons/ day.

Supply of the water is free till 14000 gallons/ day. After this point, the town needs to buy water from the outside. Thus costs keep increasing with an additional unit of water. Let's assume costs to be linear in nature such that marginal cost is a fixed constant.

Plotting demand and supply curves look like:

Quantity demanded by the town currently is constant and fixed at 9000 gallons/ day. Supply of the water is free till 14000 gallons/ day. After this point, the town needs to buy water from the outside. Thus costs keep increasing with an additional unit of water. Let's assume costs to be linear in nature such that marginal cost is a fixed constant. Plotting demand and supply curves look like: Equilibrium price = 0 Equilibrium quantity = 9000