Suppose that an economy consists of just two people: Joe and Mary. Both Joe and Mary have the same i

Suppose that an economy consists of just two people: Joe and Mary. Both Joe and Mary have
the same individual demand curve for coffee. Their individual demand curves are described by
the following equations where P is the price per cup of coffee and Q is the quantity of cups of
coffee:

Joe’s demand curve for coffee: P = 12 – Q
Mary’s demand curve for coffee: P = 12 – Q
The market supply curve is given by the following equation:
Market supply curve: P = (1/2)Q

Suppose the Mary’s income increases and she now can afford and therefore demands 4 more
cups of coffee at every price. Given this information and holding everything else constant, what
will happen to the quantity of coffee Joe demands?

a) Joe’s consumption increases by 3 cups of coffee.
b) Joe’s consumption increases by 1 cup of coffee.
c) Joe’s consumption decreases by 1 cup of coffee.
d) Joe’s consumption decreases by 3 cups of coffee.



Economics 102 midterm fall2017 - university of Waterloo