Consider the market for electric vehicles. The market price of each electric vehicle is $280,000, and each consumer demands no more than one electric vehicle. Suppose that Manuel is the only consumer in the electric vehicle market. Their willingness to pay for an electric vehicle is $490,000. Based on Manuel's willingness to pay, the following graph shows his demand curve for electric vehicles. Shade the area representing Manuel's consumer surplus using the green rectangle (triangle symbols). Manuel’s Consumer Surplus012345560490420350280210140700PRICE (Thousands of dollars)QUANTITY (Electric vehicles)Manuel’s DemandMarket Price Now, suppose another buyer, Poornima, enters the market for electric vehicles, and her willingness to pay is $420,000. Based on Poornima's and Manuel's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Manuel's consumer surplus using the green rectangle (triangle symbols), and shade Poornima's consumer surplus using the purple rectangle (diamond symbols). Note: Plot your points as a step function in the order in which you would like them connected. Line segments will connect the points automatically. Demand CurveManuel's Consumer SurplusPoornima's Consumer Surplus012345560490420350280210140700PRICE (Thousands of dollars)QUANTITY (Electric vehicles)Market PriceArea: 140 Suppose Shen is willing to pay a total of $210,000 for an electric vehicle. True or False: Keeping his maximum willingness to pay for an electric vehicle in mind, Shen will buy the electric vehicle because it would be worth more to him than its market price of $280,000. True False

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 3.7P

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2. Individual demand and consumer surplus

Consider the market for electric vehicles. The market price of each electric vehicle is $280,000, and each consumer demands no more than one electric vehicle.

Suppose that Manuel is the only consumer in the electric vehicle market. Their willingness to pay for an electric vehicle is $490,000. Based on Manuel's willingness to pay, the following graph shows his demand curve for electric vehicles.

Shade the area representing Manuel's consumer surplus using the green rectangle (triangle symbols).

Manuel’s Consumer Surplus012345560490420350280210140700PRICE (Thousands of dollars)QUANTITY (Electric vehicles)Manuel’s DemandMarket Price

Now, suppose another buyer, Poornima, enters the market for electric vehicles, and her willingness to pay is $420,000.

Based on Poornima's and Manuel's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Manuel's consumer surplus using the green rectangle (triangle symbols), and shade Poornima's consumer surplus using the purple rectangle (diamond symbols).

Note: Plot your points as a step function in the order in which you would like them connected. Line segments will connect the points automatically.

Demand CurveManuel's Consumer SurplusPoornima's Consumer Surplus012345560490420350280210140700PRICE (Thousands of dollars)QUANTITY (Electric vehicles)Market PriceArea: 140

Suppose Shen is willing to pay a total of $210,000 for an electric vehicle.

True or False: Keeping his maximum willingness to pay for an electric vehicle in mind, Shen will buy the electric vehicle because it would be worth more to him than its market price of $280,000.

True

False

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