Question

3. Consumer surplus and price changes Aa Aa . The following graph shows the demand curve for a group of consumers in the market for a mobile phone. Each consumer wants only one mobile phone. 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 o 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.) PRICE (Dollars per mobile phone) 360 Adi Paul Perkin Kristen Brian Nicholas 0 1 2 3 4 5 6 7 8 QUANTITY (Number of mobile phones) , while Area B Area A (the red shaded area) represents total consumer surplus when the market price is (the grey shaded area) represents which of the following? The change in total consumer surplus when the market price changes from $60 to $90 The change in total consumer surplus when the market price changes from $150 to $90 Total consumer surplus when the market price is $150 Total consumer surplus when the market price is $90 O

Answer 1

Area A represents the total consumer surplus when the market price is $150 while area B represents the change in total consumer surplus when market price changes from $150 to $90.

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market price of a phone should be $10 in order for nicholas to gain a consumer surplus of $20.

nicholas values the phone at $30 so he will have a consumer surplus of $20 only when the price of phone is $10