6. Suppose an individual is currently consuming Q slices of pizza. The price of

Question

6. Suppose an individual is currently consuming Q slices of pizza. The price of pizza is p per slice. Let TWTPO) be the consumer's total willingness to pay for Q slices. The total price paid for Q slices is p × Q. Thus the consumer surplus for Q slices is Define marginal willingness to pay for one more slice (the Qth+1 slice) as MWTPQ+1) TWTP(O+1)-TWTP(Q). Show that is MWTP(Q+1)> p then CS+1)>Cst), that is, if the marginal willingness to pay is greater than the price, then the consumer can increase consumer surplus by buying and eating another slice.

Explanation / Answer

Let Twtp(q+1)=14 and price is 40 so that consumer surplus =14-10=4. Now let marginal willingness for new unit be 12 while its price is 9. The new consumer surplus=12-9=3. Now total consumer surplus is 4+3=7.had new consumer surplus been 0 when price is 12 the total consumer surplus will remain constant at 4.and if The price =13 the consumer surplus will not increase at all since willingness to pay is less than price. Consumer will not demand such unit

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