Question

Suppose Spencer and Kate are the only two demanders of lemonade. Each month, Spencer buys six glasses of lemonade when the price is $1.00 per glass, and he buys four glasses when the price is $1.50 per glass. Each month, Kate buys four glasses of lemonade when the price is $1.00 per glass, and she buys two glasses when the price is $1.50 per glass. Which of the following points is on the market demand curve?

A. (quantity demanded = 2, price = $1.50)
B. (quantity demanded = 4, price = $2.50)
C. (quantity demanded = 10, price = $1.00)
D. (quantity demanded = 16, price = $2.50)

Answer 1

The correct answer is option C.

Step-by-step explanation:

Spencer and Kate are only two consumers of lemonade.

Spencer buys six glasses of lemonade when the price is $1/glass.

When the price is $1.5, he buys four glasses.

Kate buys four glasses when the price is $1.

She buys two glasses when the price is $1.5.

A market demand curve is the sum of individual demand curves.

So at price level $1, the market demand will be

= 6 glasses + 4 glasses

= 10 glasses

At price $1.5 , the market demand will be

= 4 glasses + 2 glasses

= 6 glasses

So the points on the market demand curve will be, quantity demanded = 10, price = $1 and quantity demanded = 6 and price = $1.5