Question

The following graph shows Deborah's weekly demand for cheesecake, represented by the blue line. Point A represents a point along her weekly demand curve. The market price of cheesecake is $3.00 per slice, as shown by the horizontal black line

Answer 1

a) $ 3.75

b) Consumer surplus = Willingness to pay - Actual price = 3.75 - 3 = 0.75

c) New consumer surplus = 3.75 - 2.25 = 1.50

Small Economy's Weekly Demand 7.50 6.75 Initial Consumer Surplus (P $3.00) 6.00 5.25 Demand 4.50 Additional Consumer Surplus (P $2.25) 3.75 P $3.00 3.00 a 2.25 P $2.25 1.50 0.75 0 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Thousands of slices of cheesecake)