Problem
In a two-period lived economy, one consumer wishes to buy a TV set in period 1. The consumer lives for two periods, and is willing to pay a maximum price of $100 per period of TV usage. In period 2, two consumers (who live in period 2 only) are born. Each of the newly born consumers is willing to pay a maximum of fifty dollars for using a TV in period 2. Suppose that in this market there is only one firm producing TV sets, that TV sets are durable, and that production is costless.
1) Calculate the prices the monopoly charges for TV sets in periods 1 and 2.