Consider the discrete-demand model of the market for telecommunication of Section 5.1.1. Suppose that there are two
Question:
Consider the discrete-demand model of the market for telecommunication of Section 5.1.1. Suppose that there are two types of consumers who wish to connect to a certain telecommunication service (for example, obtaining a phone service). There are 20 type H consumers who place high value on connecting to this service, and 60 type L consumers who place a lower value for this connection. Let p denote the connection fee to this service, and q the actual number of consumers connecting to this service. Then, the utility function of eachtype UH def = 2q − p connected 0 disconnected and UL def = q − p connected 0 disconnected. Draw the demand function for connecting to this telecommunication service. Label the axes and prove and explain the graph.
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