Question

The publisher of an online newspaper knows that there are two types of customers. ‘students’ and ‘non-students’. Although they cannot distinguish what type of buyer is actually making a purchase of a subscription, they know the demand curves for each type of buyer. These are given by the following:

Students: p = 80 - q
Non students: p = 100 - q
where is q is the number of articles that are purchased. Assume that the marginal cost of supplying articles equals zero.
a. What is the maximum willingness to pay for 80 articles for the students?
b. What is the maximum willingness to pay for 80 articles for non students?

Answer 1

a) The maximum willingness to pay is reflected along the demand curve which shows the inverse relationship between price and qantity.

Thus, the maximum willingness to pay is the maximum price that the cnsumer will be ready to give whichis reflected from his demand fucntionn.

The demand fucntion of students is:

p= 80-q.

When q= 80

P= 80-80= 0

The maximum willingness to pay is 0

b) The demand curve of non- students is:

p= 100- q

When q= 80

p= 20

The maximum willingness to pay would be 20