Assume that a small town uses a referendum to overcome the free ridership problem and determine how its residents might value a new water filtration system for its public water supply. The voting results are aggregated by the town's two districts, yielding the following demand estimates:
District 1: Q=160-20P1
District 2: Q=60-5P2
Where Q is the expected percent of copper to be filtered by the system and P is the price in millions of dollars.
a. Based on the estimates, determine the town's market demand for this public good, the new filtration system.
b. If the market supply for the system were P=6+ 0.15Q, what would be the equilibrium price and quantity for the town?
a. We can write the demand in district 1 into: P1 = 8 - 0.05Q
and the demand in ...
This job assesses the market demand.