Question

2.1 Define consumer surplus. 2.2 Suppose a consumer's demand curve is given by Qd = 8 -0.25P. Compute consumer surplus when P = 16.

Answer 1

Consumer surplus in simple terms can be said as the difference between what a consumer is willing to pay and he actually pays

Here) Ba= 8-0.25p | When [P-16) Q=8-625x16 Q -4 10=47 P($) $32 Corsioner Surplus = Area of upper tringle ABC = Exbasex height - 2 x 48 x 132-16) - 2x16 Ils 2$32]

For consumer surplus to exist, the willingness should always should greater than the actual payment

it works on the concept of marginal utility