The demand curve for product X is given by QXd = 520 - 4PX The demand curve for

Question

The demand curve for product X is given by QXd = 520 - 4PX

The demand curve for product X is given by QXd = 520 - 4PX.

a. Find the inverse demand curve.

PX = - QXd

Instructions: Round your answer to the nearest penny (2 decimal places).

b. How much consumer surplus do consumers receive when Px = $50?

$

c. How much consumer surplus do consumers receive when Px = $30?

$

d. In general, what happens to the level of consumer surplus as the price of a good falls?

The level of consumer surplus as the price of a good falls.

Explanation / Answer

a. QXd = 520 - 4PX

4Px = 520 – Qxd

Or

Px = 130 – 0.25Qxd

b. Consumer surplus at P = 50

At Q = 0, 0=520-4P, 4P =50 or P = 130

At P=50, Q = 520-4*50 = 520-200 =320

CS = 0.5*(130-50)*320 =12800

c. Consumer surplus at P = 30

At P=30, Q = 520-4*30 = 520-120 =400

CS = 0.5*(130-50)*400 =16000

d. As price falls consumer stands to gain more surplus.

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