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A demand curve for a public good is determined by: summing vertically the individual demand curves for the public good. The upper panel of Figure.1 shows price effect where good X is a normal good. In drawing the demand schedule or the demand curve for a good we take income of the people as given and constant. Below are the demand curves for a public good in a two person economy. multiplying the per-unit cost of the public good by the quantity made available. summing horizontally the individual demand curves for the public good. Notice that the market demand curve has the same vertical intercept as individual demands, has half of the slope and twice the horizontal intercept. In Fig. Suppose the initial price of good X (P x) is OP. To see more clearly that the demand curve for a public good represents a vertical summation of individual demand curves, let us generate an aggregate demand curve from two individual consumers with straight-lined demand curves. So in the public goods case, everyone consumes the same quantity, but each has different prices or valuations for the public good. In this case, individual consumers will all consume the same amount of the good, but each may value that public good at a different price or valuation. The generation of a market demand curve for a private good is now completed. combining the amounts of the public good that the individual members of society demand at each price. Now join these points by a curve in Fig. Therefore, when incomes of the people increase, they can afford to buy more. b) Suppose the good is purely public, for example a street lights installed in the neighbor-hood. e is the initial optimal consumption combination on indifference curve U. 1.4(d), this curve has been obtained to be DD. FIGURE.1 Derivation of the Demand Curve: Normal Goods. The greater income means the greater purchasing power. The social demand curve (or willingness to pay curve) for a public good is found by vertically summing the individuals’ demand curves. It is obvious from the method of obtaining the market demand curve that the market demand curve for a good is the horizontal summation of its individual demand curves. exactly the came market demand curve: P = 10 :5Q M where Q M is the total quantity demanded at each price. Graphically, non-rivalry means that if each of several individuals has a demand curve for a public good, then the individual demand curves are summed vertically to get the aggregate demand curve for the public good. The consumer buys OX units of good X. Map out the market demand curve for this public good, and determine the optimal amount of production. When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa. Public goods – continuous. 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