Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 14, Problem 2TY
To determine
The
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Consumer surplus is calculated by taking the difference of the price consumers are willing to pay and the price actually paid.
When the price is $4, the consumer would buy only two bottles because the value the consumer would get from the first bottle is $7. This implies, the surplus is $3.
Similarly for the second bottle, the value the consumer would get from consuming it is $5 where the price the consumer will pay is $4, this implies the surplus is $1.
Lastly, for the third bottle the value is $3 and the price is $4 so the price surpasses the value, therefore the consumer will not consumer beyond two bottles.
The consumer surplus could be calculated as:
Consumer Surplus = (7-4) + (5-4)
= 3 + 1
= 2
This means the consumer will buy two bottles.
If the price falls to $2, the consumer would only buy three bottles because the value the consumer gets from the first bottle valued at $7 versus the $2 paid implies a consumer…
The figure shows the demand curve for pizza. A) What is the 4 point marginal benefit of pizza number 20? B) What is the maximum price that the consumer wants to pay for pizza number 20? C) If the price of a pizza is $6, what is the consumer surplus for the 20th pizza? d) If the price of a pizza is $10, what is the consumer surplus? e) If the price of a pizza is $6, what is the consumer surplus?
A market is described by the following supply and demand curves:
Supply: P=0.25Q Demand: P=300-0.75Q
(a) Solve for the equilibrium price and quantity and calculate the total economic surplus with a diagram.
Chapter 14 Solutions
Economics: Principles and Policy (MindTap Course List)
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