Asked by Ayanna Akbar on Jun 02, 2024
Verified
Refer to Figure 4.4.3 above. When the price of pizza is $20, total expenditure and consumer surplus are, respectively:
A) $2000; $2000.
B) $1000; $2000.
C) $2000; $1000.
D) $1000; $1000.
Total Expenditure
The sum amount of money spent by consumers to purchase a certain quantity of goods or services.
Consumer Surplus
The disparity between what consumers are prepared and capable of paying for a product or service versus what they actually end up paying.
- Calculate and clarify the significance of consumer surplus in several market scenarios.
Verified Answer
RB
Richard BurnadzJun 06, 2024
Final Answer :
C
Explanation :
Total expenditure is calculated by multiplying the price by the quantity demanded at that price. Consumer surplus is the area above the price and below the demand curve, up to the quantity demanded. Without seeing Figure 4.4.3, the correct answer cannot be determined from the information given. However, based on the options provided and common outcomes in such scenarios, option C suggests a scenario where the total expenditure (price times quantity) is different from the consumer surplus, which is plausible if the demand curve is downward sloping and linear. This explanation is speculative and assumes a typical demand curve without seeing the actual figure.
Learning Objectives
- Calculate and clarify the significance of consumer surplus in several market scenarios.