URGENT Demand Curves for Public Goods Adam and Eve live on two sides of the Gard
ID: 1102225 • Letter: U
Question
URGENT
Demand Curves for Public Goods
Adam and Eve live on two sides of the Garden of Eden, a small suburban development. After
they move in, an old PCB dump is discovered in between their houses. If X total tons of PCB's
are removed from the dump, the two have a true willingness to pay (WTP) to finance a clean-up
equal to: ADAM's WTP = 10 - X and EVE's WTP = 6 - X
b. Draw one diagram illustrating the two individuals demand curves for clean-up, and the total
demand for clean-up in the neighborhood. What is the total WTP for 3 tons of clean-up?
c. If cleaning up 2 tons were to cost $12, is their sufficient WTP in this small community to
finance it? What are two potential reasons why a voluntary clean-up might nevertheless fail?
Please show work and the graph. I will add more points to award
Explanation / Answer
a. No, could be Eve just doesn't have the disposable income that Adam does.
c. Yes, the total WTP is 10-X + 6-X, in this scenario 8+4 = 12, just enough. However it could fail if the clean-up isn't done properly, due to lack of information, training, etc.
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