On the basis of the three individual demand schedules below

On the basis of the three individual demand schedules below, and assuming these three people are the only in the society, determine the collative demand schedule on the assumption that the good if a public good. Responses go into the gray shaded cells. Use the public schedule above and the ofllowing apply schedule to ascertain the quality of the public good.

Solution

) Private good, top to bottom: P = $8, Q = 1; P = $7, Q = 2; P = $6, Q = 4; P = $5, Q = 7; P = $4, Q = 10; P = $3, Q = 13; P = $2, Q = 16; P = $1, Q = 19. (b) Public good, top to bottom; P = $19, Q = 1; P = $16, Q = 2; P = $13, Q = 3; P = $10, Q = 4; P = $7, Q = 5; P = $4, Q = 6; P = $2, Q = 7; P = $1, Q = 8. The first schedule represents a horizontal summation of the individual demand curves; the second schedule represents a vertical summation of these curves. The market demand curve for the private good will determine—in combination with market supply—an actual price-quantity outcome in the marketplace. Because potential buyers of public goods do not reveal their individual preferences in the market, the collective demand curve for the public good is hypothetical or needs to be determined through “willingness to pay” studies.