Which of the following best describes how the demand curve for a public good is derived?

• A. By averaging individual demand curves for the good
• B. By vertically summing individual demand curves for the good
• C. By multiplying individual demand curves for the good
• D. By horizontally summing individual demand curves for the good

Answer: (B)

Verified step by step guidance

1. Understand that a public good is non-rivalrous and non-excludable, meaning one person's consumption does not reduce availability for others.
2. Recall that for private goods, the market demand curve is found by horizontally summing individual demand curves because consumers buy separate quantities.
3. Recognize that for public goods, the quantity consumed is the same for all individuals, so the total willingness to pay at each quantity is the sum of individual valuations.
4. Therefore, to derive the demand curve for a public good, you vertically sum the individual demand curves, adding the prices (willingness to pay) of all individuals at each quantity level.
5. This vertical summation reflects the total value society places on each quantity of the public good, which forms the market demand curve for that good.