Use the figure below, Arnold\'s demand curve for burritos, to answer questions 1

Question

Use the figure below, Arnold's demand curve for burritos, to answer questions
1.Arnold's marginal benefit from consuming the third burrito is?

2. If the market price is $1.00, what is the consumer surplus on the third burrito?
3. If the market price is $1.00, what is Arnold's consumer surplus?
4. What is the total amount that Arnold is willing to pay for 3 burritos?
5. If the market price is $1.00, what is the maximum number of burritos that Arnold will buy?
please give details

Explanation / Answer

(1) Marginal benefit from 3rd burrito = Price of 3rd burrito = $1.5

(2) Consumer surplus (CS) = Area between demand curve and market price

When P = $1, CS of 3rd burrito = CS for 4 burritos - CS for 3 burritos

When Q = 4, CS = (1/2) x $(3 - 1) x 4 = (1/2) x $2 x 4 = $4

When Q = 3, CS = (1/2) x $(3 - 1) x 3 = (1/2) x $2 x 3 = $3

CS for 3rd burrito = $(4 - 3) = $1

(3) When P = $1, total CS = (1/2) x $(3 - 1) x 4 = (1/2) x $2 x 4 = $4

(4) Total amount = $(3 + 2.5 + 2 + 1.5) = $9

(5) At price = $1, he will buy a maximum of 4 units.

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