Consumer surplus and price changes The following graph shows the demand curve fo

Question

Consumer surplus and price changes The following graph shows the demand curve for a group of students in the market for a graphing calculator. Each student wants only one calculator. Assume that if an individual has a willingness to pay just equal to the market price, he or she will make the purchase. (Notice that on this graph, the demand curve is drawn as a series of steps, but only the rightmost corner of each step tells us the integer quantity demanded at a given price. In your textbook, graphs like this might connect these rightmost corners with a continually downward-sloping line or curve, but either graphing method gives us the same information about the quantity demanded.) Area A (the red shaded area) represents total consumer surplus when the market price is while Area B (the grey shaded area) represents which of the following? Total consumer surplus when the market price is $100 Total consumer surplus when the market price is $75 The change in total consumer surplus when the market price changes from $50 to $75 The change in total consumer surplus when the market pnce changes from $100 to $75 What does the market price of a graphing calculator need to be in order for Nicholas to gain a consumer surplus of $20 from buying a calculator? $5 $50 $30 $25

Explanation / Answer

Answer to blank 1: $100

Area B represents the change in total consumer surplus when the market price changes from $100 to $75.

Answer to second Questiion: $5

Explanation: Nicholas is willing to pay $25 for graphing calculator. If Nicholas to gain a consumer surplus of $20, the market price should be $25 - $20 = $5.

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