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Now, suppose another buyer, Neha, enters the market for loft houses, and her willingness to pay is $480,000. Based on Neha's and Lorenzo's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Lorenzo's consumer surplus using the green rectangle (triangle symbois), and shade Neha'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. PRICE (Thousands of dollars) 640 8 560 480 400 320 240 160 80 QUANTITY (Loft houses) Suppose Sam is willing to pay a total of $240,000 for a loft house. True Market Price False Demand Curve Lorenzo's Consumer Surplus i Neha's Consumer Surplus True or False: Keeping his maximum willingness to pay for a loft house in mind, Sam will buy the loft house because it would be worth more to him than its market price of $320,000. image 2

Now, suppose another buyer, Neha, enters the market for loft houses, and her willingness to pay is $480,000. Based on Neha's and Lorenzo's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Lorenzo's consumer surplus using the green rectangle (triangle symbois), and shade Neha'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. PRICE (Thousands of dollars) 640 8 560 480 400 320 240 160 80 QUANTITY (Loft houses) Suppose Sam is willing to pay a total of $240,000 for a loft house. True Market Price False Demand Curve Lorenzo's Consumer Surplus i Neha's Consumer Surplus True or False: Keeping his maximum willingness to pay for a loft house in mind, Sam will buy the loft house because it would be worth more to him than its market price of $320,000. image 2

ECON MICRO
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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Now, suppose another buyer, Neha, enters the market for loft houses, and her willingness to pay is $480,000. Based on Neha's and Lorenzo's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Lorenzo's consumer surplus using the green rectangle (triangle symbols), and shade Neha'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. ? PRICE (Thousands of dollars) 640 560 480 400 320 240 160 QUANTITY (Loft houses) Suppose Sam is willing to pay a total of $240,000 for a loft house. True Market Price False Demand Curve Lorenzo's Consumer Surplus Neha's Consumer Surplus True or False: Keeping his maximum willingness to pay for a loft house in mind, Sam will buy the loft house because it would be worth more to him than its market price of $320,000. image 2
Transcribed Image Text:Now, suppose another buyer, Neha, enters the market for loft houses, and her willingness to pay is $480,000. Based on Neha's and Lorenzo's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Lorenzo's consumer surplus using the green rectangle (triangle symbols), and shade Neha'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. ? PRICE (Thousands of dollars) 640 560 480 400 320 240 160 QUANTITY (Loft houses) Suppose Sam is willing to pay a total of $240,000 for a loft house. True Market Price False Demand Curve Lorenzo's Consumer Surplus Neha's Consumer Surplus True or False: Keeping his maximum willingness to pay for a loft house in mind, Sam will buy the loft house because it would be worth more to him than its market price of $320,000. image 2
2. Individual demand and consumer surplus Consider the market for loft houses. The market price of each loft house is $320,000, and each consumer demands no more than one loft house. Suppose that Lorenzo is the only consumer in the loft house market. Their willingness to pay for a loft house is $560,000. Based on Lorenzo's willingness to pay, the following graph shows his demand curve for loft houses. Shade the area representing Lorenzo's consumer surplus using the green rectangle (triangle symbols). PRICE (Thousands of dollars) 640 560 480 400 320 240 160 8 0 0 Lorenzo's Demand 3 QUANTITY (Loft houses) Market Price Lorenzo's Consumer Surplus image 1
Transcribed Image Text:2. Individual demand and consumer surplus Consider the market for loft houses. The market price of each loft house is $320,000, and each consumer demands no more than one loft house. Suppose that Lorenzo is the only consumer in the loft house market. Their willingness to pay for a loft house is $560,000. Based on Lorenzo's willingness to pay, the following graph shows his demand curve for loft houses. Shade the area representing Lorenzo's consumer surplus using the green rectangle (triangle symbols). PRICE (Thousands of dollars) 640 560 480 400 320 240 160 8 0 0 Lorenzo's Demand 3 QUANTITY (Loft houses) Market Price Lorenzo's Consumer Surplus image 1
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