{"id":217571,"date":"2025-05-22T05:54:53","date_gmt":"2025-05-22T05:54:53","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=217571"},"modified":"2025-05-22T05:54:55","modified_gmt":"2025-05-22T05:54:55","slug":"suppose-there-are-25-people-with-a-reservation-price-of-500-and-the-26th-person-has-a-reservation-price-of-200","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/22\/suppose-there-are-25-people-with-a-reservation-price-of-500-and-the-26th-person-has-a-reservation-price-of-200\/","title":{"rendered":"Suppose there are 25 people with a reservation price of $500, and the 26th person has a reservation price of $200."},"content":{"rendered":"\n

Suppose there are 25 people with a reservation price of $500, and the 26th person has a reservation price of $200.<\/p>\n\n\n\n

What would the demand curve look like based on this information?<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

Correct Answer:<\/h3>\n\n\n\n

The demand curve based on the given information would be a step-shaped (or staircase-like) demand curve<\/strong>, starting at a price of \\$500 for quantities 1 through 25, and then dropping to \\$200 at quantity 26.<\/p>\n\n\n\n

\n\n\n\n

Explanation:<\/h3>\n\n\n\n

A demand curve<\/strong> illustrates the relationship between the price of a good or service<\/strong> and the quantity demanded<\/strong> by consumers. Each individual’s reservation price<\/strong> is the maximum price<\/strong> they are willing to pay. If the market price is equal to or lower than their reservation price, the individual will buy the product; otherwise, they won\u2019t.<\/p>\n\n\n\n

In this scenario:<\/p>\n\n\n\n

    \n
  • There are 25 people<\/strong> each willing to pay \\$500<\/strong>. This means at a price of \\$500, up to 25 units<\/strong> of the product will be demanded.<\/li>\n\n\n\n
  • The 26th person<\/strong> has a reservation price of only \\$200<\/strong>. This individual would only be willing to buy the product if the price drops to \\$200 or lower.<\/li>\n<\/ul>\n\n\n\n

    This results in a step-shaped demand curve<\/strong>:<\/p>\n\n\n\n

      \n
    • From quantity 1 to 25<\/strong>, the demand curve is flat at \\$500<\/strong>, indicating that all these buyers will purchase at that price.<\/li>\n\n\n\n
    • At quantity 26<\/strong>, the price suddenly drops to \\$200<\/strong>, because only the 26th person is willing to buy at that lower price.<\/li>\n<\/ul>\n\n\n\n

      In graphical terms, the curve would look like a horizontal line at \\$500 from 1 to 25 on the quantity axis, then drop vertically to \\$200 at quantity 26. There would be no gradual slope since the prices are distinctly different and the number of buyers with each reservation price is fixed.<\/p>\n\n\n\n

      This is typical of a discrete demand curve<\/strong>, often seen in markets with a small number of buyers, where each buyer has a known reservation price. The shape reflects the individual steps of willingness to pay<\/strong> and is especially relevant in auctions or limited supply settings.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Suppose there are 25 people with a reservation price of $500, and the 26th person has a reservation price of $200. What would the demand curve look like based on this information? The Correct Answer and Explanation is: Correct Answer: The demand curve based on the given information would be a step-shaped (or staircase-like) demand […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-217571","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/217571","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=217571"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/217571\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=217571"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=217571"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=217571"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}