Exploring Microeconomics
Exploring Microeconomics
8th Edition
ISBN: 9781544339443
Author: Sexton, Robert L.
Publisher: Sage Publications, Inc., Corwin, Cq Press,
Question
Chapter 7, Problem 1P
To determine

(a)

The consumer surplus if the price of each karate lesson is P0.

Expert Solution
Check Mark

Answer to Problem 1P

The consumer surplus will be the area a.

Explanation of Solution

In the given figure, the vertical axis is shown as the price of karate lessons and horizontal axis shows the quantity of karate lessons. If the price of each karate lesson is P0, the consumer surplus will be the area a because this is the only part which lies above the price level P0 and below the demand curve.

Economics Concept Introduction

Concept Introduction:

It is defined as the difference between the amount which the consumers are willing to pay and the amount which the consumers actually pay. It is the area of above the price level and below the demand curve.

To determine

(b)

The consumer surplus if the price of each karate lesson reduces from P0 to P1.

Expert Solution
Check Mark

Answer to Problem 1P

The change in consumer surplus will be area(b+c).

Explanation of Solution

In the given figure, the vertical axis is shown as the price of karate lessons and horizontal axis shows the quantity of karate lessons. If the price of each karate lesson reduces from P0 to P1, the consumer surplus will be the sum of area a, b and c.

Because due to fall in the price of karate, more consumers would be willing to join the karate lessons and hence, the quantity demanded also increases.

Economics Concept Introduction

Concept Introduction:

It is defined as the difference between the amount which the consumers are willing to pay and the amount which the consumers actually pay. It is the area of above the price level and below the demand curve.

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Students have asked these similar questions
The cookie demand curve slopes downward. When the price of cookies is $ 2, the quantity demanded is 100. If the price increases to $ 3, what happens to the consumer surplus?
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…
What is meant by consumer surplus?   a It is the total quantity of a good bought by a consumer divided by the price paid.   b It is a measure of an individual consumer's utility from the consumption of a good.   c It is the difference between a consumer's maximum willingness to pay and the price.   d It is a measure of the total benefit to consumers from the purchase of a good.
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