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Question

Suppose there are 20 consumers for a good and they have identical demand functions:

D(p) = 10 − 3p for any price less than or equal to and d1(p) = 0 at any price greater than .

What is the market demand function?

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Solution

d(p) = 10 − 3p if p

d1 (p) = 0 if p >

Market demand = Summation of demand of all the consumers in the market

For price

Market demand = 20 ∑d (p) ( Since consumers have identical demand curve)

= 20 × (10 − 3p)

= 200 − 60p

For price >

Market demand = 20 × d1(p)

= 20 × 0

= 0


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