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?Andrew's Weekly Demand7.506.756.005.25Demand4.503.75Price3.002.251.500.75080246101214.161820QUANTITY (Slices of apple pie)PRICE (Dollars per slice) (?)Small Economy's Weekly Demand7.506.75Initial Consumer Surplus (P$3.00)6.00ADemand5.25Additional Consumer Surplus (P $2.25)4.503.75P $3.003.002.25P $2.251.500.7504080100120140160180200QUANTITY (Thousands of slices of apple pie)6020PRICE (Dollars per slice)

Question

The following graph shows Andrew's weekly demand for apple pie, represented by the blue line. Point A represents a point along his weekly demand curve. The market price of apple pie is $3.00 per slice, as shown by the horizontal black line.

(Part 2)
From the previous graph, you can tell that Andrew is willing to pay
for his 8th slice of apple pie each week. Because he has to pay only $3.00 per slice, the consumer surplus he gains from the 8th slice of apple pie is
 
Suppose the price of apple pie were to fall to $2.25 per slice. At this lower price, Andrew would receive a consumer surplus of
from the 8th slice of apple pie he buys.
 
The following graph shows the weekly market demand for apple pie in a small economy.
 
Use the purple point (diamond symbol) to shade the area representing consumer surplus when the price (P) of apple pie is $3.00 per slice. Then, use the green point (triangle symbol) to shade the area representing additional consumer surplus when the price falls to $2.25 per slice.
?
Andrew's Weekly Demand
7.50
6.75
6.00
5.25
Demand
4.50
3.75
Price
3.00
2.25
1.50
0.75
0
8
0
2
4
6
10
12
14.
16
18
20
QUANTITY (Slices of apple pie)
PRICE (Dollars per slice)
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? Andrew's Weekly Demand 7.50 6.75 6.00 5.25 Demand 4.50 3.75 Price 3.00 2.25 1.50 0.75 0 8 0 2 4 6 10 12 14. 16 18 20 QUANTITY (Slices of apple pie) PRICE (Dollars per slice)

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(?)
Small Economy's Weekly Demand
7.50
6.75
Initial Consumer Surplus (P
$3.00)
6.00
A
Demand
5.25
Additional Consumer Surplus (P $2.25)
4.50
3.75
P $3.00
3.00
2.25
P $2.25
1.50
0.75
0
40
80
100
120
140
160
180
200
QUANTITY (Thousands of slices of apple pie)
60
20
PRICE (Dollars per slice)
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(?) Small Economy's Weekly Demand 7.50 6.75 Initial Consumer Surplus (P $3.00) 6.00 A Demand 5.25 Additional Consumer Surplus (P $2.25) 4.50 3.75 P $3.00 3.00 2.25 P $2.25 1.50 0.75 0 40 80 100 120 140 160 180 200 QUANTITY (Thousands of slices of apple pie) 60 20 PRICE (Dollars per slice)

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check_circleAnswer
Step 1

The consumer surplus can be defined as the difference between highest willing to pay of a consumer to satisfy his/her needs and the original price that the consumer pays. If the market price of the apple pie is $3.00 and A’s willing to pay is $3.75, the consumer surplus gained by A from 8th slice of apple pie he buys can be calculated as follows.

Consumer surplus Willing to pay Actual price
=3.75-3.00
=0.75
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Consumer surplus Willing to pay Actual price =3.75-3.00 =0.75

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Step 2

If the market price of the apple pie decline to $2.25 with the same willing to pay, the consumer surplus gained by A from 8th slice of apple pie he buys can be calculated as follows.

Willing to pay Actual price
Consumer surplus
=3.75-2.25
= 1.50
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Willing to pay Actual price Consumer surplus =3.75-2.25 = 1.50

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Step 3

The consumer surplus from 8th slice of apple pie at the market price $3.00 and ...

A's consumer surplus at $3.00
7.50
A's consumer surplus at $2.25
7.50
6.75
6.75
6.00
6.00
5.25
Demand
Consumer surplus
Demand
5.25
Consumer surplus
4.50
4.50
3.75
3.75
Price
3.00
Price
3.00
2.25
2.25
1.50
1.50
0.75
0.75
0
2
6
8
10
12
16
18
20
4
14
0
o 12
QUANTITY (Slices of apple pie)
QUANTITY (Slices of apple pie)
16
0
2
6
8
10
14
18
20
Figure 1
figure 2
PRICE (Dollars per slice)
O
PRICE (Dollars per slice)
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A's consumer surplus at $3.00 7.50 A's consumer surplus at $2.25 7.50 6.75 6.75 6.00 6.00 5.25 Demand Consumer surplus Demand 5.25 Consumer surplus 4.50 4.50 3.75 3.75 Price 3.00 Price 3.00 2.25 2.25 1.50 1.50 0.75 0.75 0 2 6 8 10 12 16 18 20 4 14 0 o 12 QUANTITY (Slices of apple pie) QUANTITY (Slices of apple pie) 16 0 2 6 8 10 14 18 20 Figure 1 figure 2 PRICE (Dollars per slice) O PRICE (Dollars per slice)

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