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

• A. By horizontally summing the individual demand curves of all consumers
• B. By vertically summing the individual demand curves of all consumers
• C. By averaging the individual demand curves of all consumers
• D. By selecting the highest individual demand curve among all consumers

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, and everyone can consume it simultaneously.
2. Recall that for private goods, the market demand curve is derived by horizontally summing individual demand curves because consumers choose quantities independently.
3. Recognize that for public goods, the quantity consumed is the same for all consumers, so the total willingness to pay at each quantity is the sum of individual valuations (prices).
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 consumers at each quantity level.
5. This vertical summation reflects the total marginal benefit society receives from each additional unit of the public good, which forms the social demand curve.