Asked by Scott Jordan on Jul 20, 2024
Verified
(Figure: Consumer Surplus II) Look at the figure Consumer Surplus II.If the price of the good is $2,consumer surplus will equal:
A) $30.
B) $45.
C) $60.
D) $90.
Consumer Surplus
The disparity between the total payment consumers are willing and have the ability to make for a good or service, and the payment they indeed make.
- Understand the concept of consumer surplus and how it is depicted graphically.
- Calculate consumer surplus at different price points given a supply and demand diagram.
Verified Answer
DC
DANNY CUELLARJul 22, 2024
Final Answer :
B
Explanation :
When the price of the good is $2, the quantity demanded is 15 units. The consumer surplus can be calculated as the area below the demand curve and above the price, up to the quantity demanded. This area is a triangle with a base of 15 units (quantity demanded) and a height of $3 ($5 - $2 = $3, the difference between the highest price the consumer is willing to pay and the actual price). Therefore, consumer surplus = 0.5 x base x height = 0.5 x 15 x 3 = $22.50 per unit. Multiplying this by the 2 units gives a total consumer surplus of $45.
Learning Objectives
- Understand the concept of consumer surplus and how it is depicted graphically.
- Calculate consumer surplus at different price points given a supply and demand diagram.
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