Suppose Julia and Zach are the only consumers of milk.Julia's demand for milk is defined as Q^d_Julia = 12 - 3P at prices below $4 and zero for prices above $4.Zach's demand for milk is defined as Q^d_Zach = 10 - 2P at prices below $5 and zero for prices above $5.In this case,the market demand curve for milk is: A) upward sloping. B) a downward sloping straight line. C) kinked at a quantity of 2 units. D) kinked at a quantity of 1 unit.

Question

Quizplus · Accepted Answer

The market demand curve is the horizontal summation of the individual demand curves. Since both Julia and Zach have a zero quantity demanded when the price exceeds their respective limits, the market demand curve will also be zero at those prices. Therefore, the market demand curve will have a kink at the quantity where either Julia or Zach's demand curve hits zero, which is 2 units in this case. Above this quantity, the market demand curve is given by Q^d_Market = (12 - 3P) + (10 - 2P) = 22 - 5P. Below this quantity, the market demand curve is given by Q^d_Market = 12 - 3P. Therefore, the market demand curve has a kink at a quantity of 2 units.

Suppose Julia and Zach Are the Only Consumers of Milk