Confused on what to do to be able to solve Suppose that Shen, an excellent high school basketball player, is being recruited by DukeUniversity (that is, Duke is the consumer in this example). NCAA rules prevent universities fromcompensating student athletes more than the full cost of tuition. Assume that recruiting for collegeathletes is organized under a perfectly competitive environment.The following graph shows the supply of and demand for Shen's athletic services. Suppose thatDuke's annual tuition is $27,000 (the amount of scholarship money, or the "wage," Shen receivesin exchange for playing at Duke).Shade the area representing Duke's consumers' surplus using the green point (triangle symbol).Then shade the area representing Shen's total wage revenue using the purple point (diamondsymbol).WAGE (Thousands of dollars)5 8605-44.83630 Tuition2418126Demand0Shen's Athletic ServicesSupplyATHLETIC SERVICESACSOTotal WageAgain, the following graph shows the supply of and demand for Shen's athletic services. Supposethat the NCAA revokes its rule, so universities can pay student athletes any wage with nolimitations.Use the black point to indicate the wage Duke University will pay Shen under these conditions, Again, the following graph shows the supply of and demand for Shen's athletic services. Supposethat the NCAA revokes its rule, so universities can pay student athletes any wage with nolimitations.Use the black point to indicate the wage Duke University will pay Shen under these conditions.Then shade Duke's consumers' surplus using the green point (triangle symbol). Finally, shadeShen's total wage revenue using the purple point (diamond symbol).WAGE (Thousands of dollars)605448423630241812600DemandShen's Athletic ServicesSupplyATHLETIC SERVICES+Equilibrium WageACSTotal WageWhen the NCAA revokes its rule about student athlete wages, the wage Shen receivesand Duke's consumers' surplus

Answered: Suppose that Shen, an excellent high…

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 4DQ

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Confused on what to do to be able to solve

Suppose that Shen, an excellent high school basketball player, is being recruited by Duke
University (that is, Duke is the consumer in this example). NCAA rules prevent universities from
compensating student athletes more than the full cost of tuition. Assume that recruiting for college
athletes is organized under a perfectly competitive environment.
The following graph shows the supply of and demand for Shen's athletic services. Suppose that
Duke's annual tuition is $27,000 (the amount of scholarship money, or the "wage," Shen receives
in exchange for playing at Duke).
Shade the area representing Duke's consumers' surplus using the green point (triangle symbol).
Then shade the area representing Shen's total wage revenue using the purple point (diamond
symbol).
WAGE (Thousands of dollars)
5 8
60
5-4
4.8
36
30 Tuition
24
18
12
6
Demand
0
Shen's Athletic Services
Supply
ATHLETIC SERVICES
A
CS
O
Total Wage
Again, the following graph shows the supply of and demand for Shen's athletic services. Suppose
that the NCAA revokes its rule, so universities can pay student athletes any wage with no
limitations.
Use the black point to indicate the wage Duke University will pay Shen under these conditions,

Again, the following graph shows the supply of and demand for Shen's athletic services. Suppose
that the NCAA revokes its rule, so universities can pay student athletes any wage with no
limitations.
Use the black point to indicate the wage Duke University will pay Shen under these conditions.
Then shade Duke's consumers' surplus using the green point (triangle symbol). Finally, shade
Shen's total wage revenue using the purple point (diamond symbol).
WAGE (Thousands of dollars)
60
54
48
42
36
30
24
18
12
6
0
0
Demand
Shen's Athletic Services
Supply
ATHLETIC SERVICES
+
Equilibrium Wage
A
CS
Total Wage
When the NCAA revokes its rule about student athlete wages, the wage Shen receives
and Duke's consumers' surplus

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Introduction

Consumer surplus is the gap between what consumers are willing to spend and what they actually pay for a commodity or service. It is used to gauge how much a customer gains from a purchase of a good or service. It is employed to gauge how much overall wellbeing consumers derive from participation in a market.

Consumer surplus is important to measure the total welfare a consumer receives from participating in a market. It is used to understand how much benefit consumers are getting from participating in a market. This information can then be used to inform decisions about pricing and taxation.

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