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5. Suppose that there are two consumers with willingness to pay as follows: Consumer 1: Green...

5. Suppose that there are two consumers with willingness to pay as follows: Consumer 1: Green good $100; Conventional good $50. Consumer 2: Green good $75; Conventional good $40. How much revenue will the following two pricing schemes generate? (5 points) Scheme a: Green good $90; Conventional good $30. (5 points) Scheme b: Green good $80; Conventional good $40.

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Answer #1

a) At the price of Green good $90 and Conventional good $30, cosumer 1 will buy 1 unit of grren good and 1 unit of conventional good. Consumer 2 will buy only 1 unit of conventional good. So,

Total revenue generated = ($90 * 1) + ($30 * 2) = $150

a) At the price of Green good $80 and Conventional good $40, cosumer 1 will buy 1 unit of grren good and 1 unit of conventional good. Consumer 2 will buy only 1 unit of conventional good. So,

Total revenue = ($90 * 1) + ($40 * 2) = $170

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