Question

Refer to the figure below. What is total consumer surplus at the market equilibrium?

Supply Price ($/pound) Demand 0 10 20 30 40 50 60 70 80 Quantity (pounds of cheese/day)

Select one:

a. $6 per day

b. $80 per day

c. $160 per day

d. $240 per day

Answer 1

Consumer Surplus - It refers to the difference between what consumer is willing to pay and what consumer actually pays in the market.

So in the above graph as the market price is $6 because the demand curve and supply curve are intersecting at $6 hence the region above this price and under the demand curve is the consumer surplus.

Supply Price ($/pound) Demand 0 10 20 30 40 50 60 70 80 Quantity (pounds of cheese/day)

The shaded region in the above graph shows consumer surplus which is a triangle. The area of this triangle will be consumer surplus.

Area of triangle = 1/2 x base x height

Area of triangle = 1/2 x 40 x 4

Area of triangle = $80

Thus the consumer surplus will be $80 per day

Option B is correct