Suppose the market for rental cars has two segments, business travelers and vacation travelers. The demand curve for rental cars by business travelers is Qb = 35 ˆ’ 0.25P, where Qb is the quantity demanded by business travelers (in thousands of cars) when the rental price is P dollars per day. No business customers will rent cars if the price exceeds $140 per day. The demand curve for rental cars by vacation travelers is Qv = 120 ˆ’ 1.5P, where Qv is the quantity demanded by vacation travelers (in thousands of cars) when the rental price is P dollars per day. No vacation customers will rent cars if the price exceeds $80 per day.
a) Fill in the table to find the quantities demanded in the market at each price.

b) Graph the demand curves for each segment, and draw the market demand curve for rental cars.
c) Describe the market demand curve algebraically. In other words, show how the quantity demanded in the market Qm depends on P. Make sure that your algebraic equation for the market demand is consistent with your answers to parts (a) and (b).
d) If the price of a rental car is $60, what is the consumer surplus in each market segment?

Transcribed Image Text:

Market Demand Business Vacation Price (thousands of (thousands of (thousands of (S/day) cars/day) car/day) cars/day) 100 90 80 70 60 50