Question
Individuals A and B are the only consumers of good X. Individual A demand for good X is given by: Q = 4 - P
Individuals A and B are the only consumers of good X. Individual A demand for good X is given by: Q = 4 - P and individual B demand for good X is given by: Q = 8 - 2P. The supply for good X is given by MC = 3.Assume good X is a (pure) public good. Let Lindahl price for individual A equal to individual A valuation (P) of quantity Q* and Lindahl price for individual B equal to individual B valuation (P) of quantity Q*.
What will each individual be charged for the same equilibrium quantity Q* of the public good they both consume? How/why does it change?
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