Question
Two families (A and B) live on a dark street. The local council will provide streetlights if the two families are willing to pay for
Two families (A and B) live on a dark street. The local council will provide streetlights if the two
families are willing to pay for the running costs, which are $30 a month per streetlight. The
demand of the two families for streetlights is estimated to be
A A P = 40 2Q and B B P = 30 2Q , where P is the price the family is willing to pay for a
streetlight per month.
i. Express the total demand function for streetlights.
ii. How many streetlights should be provided?
iii. If the council charges family A $15 and family B $15, could unanimity be achieved?
iv. What would be the share of expenses between family A and B if unanimity is to be
achieved?
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