We are considering a market for a discrete good. Each consumer can consume

either zero or one units of the good. Suppose the market consists of five people

(name them A, B, C, D, and E), with reservation prices of $5, $4, $4, $2, and

$1 respectively.

(a) Suppose the price were $2.50. Which consumers would purchase the good?

What is the market quantity demanded?

(b) Draw the market demand curve for this good. Note that, unlike the examples we saw in class, this demand curve might not be smooth. You may

assume that if the price exactly equals a consumer's reservation price, then

she will purchase the good.

(c) Compute the consumer surplus if the market price were $2.50.