How Does the Construction of a Market Demand Curve for a Private

question 247

Multiple Choice

How does the construction of a market demand curve for a private good differ from that for a public good?

• A)There is no difference; in both cases the demand curve is determined by adding up the price each consumer is willing to pay for each quantity of the good.
• B)There is no difference; in both cases the demand curve is determined by adding up the quantities demanded by each consumer at each price.
• C)The market demand curve for a private good is determined by adding up the quantities demanded by each consumer at each price but the market demand curve for a public good is determined by adding up the price each consumer is willing to pay for each quantity of the good.
• D)The market demand curve for a private good is determined by adding up the price each consumer is willing to pay for each quantity of the good but the market demand curve for a public good is determined by adding up the quantities demanded by each consumer at each price.

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Definitions:

Equilibrium Price

The rate at which the amount of products offered matches the amount of products consumers desire in the marketplace.

Demand Functions

Mathematical formulas representing the relationship between the quantity demanded of a good or service and its price, along with other factors like income and prices of related goods.

Supply Functions

Mathematical functions that describe the quantity of a good that producers are willing to sell at different prices, holding other factors constant.

Price Ceiling

A legally imposed limit on how high the price of a product can be charged in the market, usually set to protect consumers from excessively high prices.