Suppose that the demand side of the market for orange juice is composed of three individuals, A, B, and C. Let P be the price of one liter of orange juice and Q^d be the quantity demanded of orange juice in liters. • Individual A buys only one liter of orange juice if the price falls below her reservation (or choke) price of 10 dollars. • Individual B's demand for orange juice is defined by Q_B^d = 5 - P/2. • Individual C buys 2 liters if the price is below 5 dollars, 1 liter if the price is between 5 and 10 dollars and nothing if the price is above 10 dollars. Sketch the market demand by aggregating the three individual demands. Label you graph clearly. Suggestion: Sketch individual demands first and then sketch the market demand.
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Individual A buys only one liter of orange juice if the price falls below her reservation price of 10 dollars. This means that her demand is 1 liter when the price is below 10 dollars, and zero when the price is 10 dollars or above. We can represent this on a Show more…
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