Question

The following graph shows the demand curve for a group of consumers in the U.S. market (blue line) for tablets. The market price of a tablet is shown by the black horizontal line at $120.

 Each rectangle you can place on the following graph corresponds to a particular buyer in this market: orange (square symbols) for Dmitri, green (triangle symbols) for Frances, purple (diamond symbols) for Jake, tan (dash symbols) for Latasha, and blue (circle symbols) for Nick. Use the rectangles to shade the areas representing consumer surplus for each person who is willing and able to purchase a tablet at a market price of $120. (Note: If a person will not purchase a tablet at the market price, indicate this by leaving his or her rectangle in its original position on the palette.)

Based on the information on the previous graph, you can tell that (1/2/3/4/5 consumers) will buy tablets at the given market price, and total consumer surplus in this market will be $______.

Suppose the market price of a tablet decreases to $60.

 On the following graph, use the rectangles once again to shade the areas representing consumer surplus for each person who is willing and able to purchase a tablet at the new market price: orange (square symbols) for Dmitri, green (triangle symbols) for Frances, purple (diamond symbols) for Jake, tan (dash symbols) for Latasha, and blue (circle symbols) for Nick. (Note: If a person will not purchase a tablet at the new market price, indicate this by leaving his or her rectangle in its original position on the palette.)

Based on the information in the second graph, when the market price of a tablet decreases to $60, the number of consumers willing to buy a tablet (decreases/increases) to (1/2/3/4/5 consumers) , and total consumer surplus (decreases/increases) to $______.

Answer 1

a) 3 consumers

b) Total consumer surplus = (225 - 120)(1 - 0) + (195 - 120)(2 - 1) + (150 - 120)(3 - 2) = 105 + 75 + 30 = 210

c) Increases to 4 consumers

d) Consumer surplus increases

New C.S = (225 - 60)(1 - 0) + (195 - 60)(2 - 1) + (150 - 60)(3 - 2) + (90 - 60)(4 - 3) = 165 + 135 + 90 + 30 = 420