Asked by Marin Webster hannon on May 26, 2024
Verified
Refer to Figure 7-14. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase?
Consumer Surplus
The contrast between the full amount consumers are willing to disburse for a product or service and the actual disbursement.
Price Floor
A government-imposed minimum price that can be charged for a good or service, intended to prevent prices from dropping too low.
- Familiarize yourself with the concept of consumer surplus and its computation in conditions of market equilibrium.
- Expound on the effect that governmental regulations, including price floors and ceilings, have on consumer and producer gains.
- Apply concepts of surplus to evaluate changes in market conditions.
Verified Answer
BF
Brigith FloresJun 02, 2024
Final Answer :
With the removal of the price floor, total consumer surplus would increase from $900 to $1,600 for an increase of $700.
Learning Objectives
- Familiarize yourself with the concept of consumer surplus and its computation in conditions of market equilibrium.
- Expound on the effect that governmental regulations, including price floors and ceilings, have on consumer and producer gains.
- Apply concepts of surplus to evaluate changes in market conditions.