Suppose there are two type of customers for a comic book store. The owner has conducted interviews and concluded that there are around 50 customers each with a demand curve P = 20 - 5Q and another 20 each with demand curve P = 20 - Q, where P is the price and Q is the quantity demanded.
(a) What is the total bookstore’s demand function?
(b) Draw a graph of the total bookstore’s demand.
(c) If the seller set the price to $5, what is the total quantity demanded?
(d) What is the elasticity of demand at the above bundle?
(e) If the owner slightly increases the price, would the total expenditure of customers increase or decrease? Explain.
(f) Show the total consumer surplus at P = 5 on the graph.