Question

3. Consumer surplus for a group of consumers The following graph shows the demand curve for a group of consumers in the U.S. market (blue line) for laptops. The market price of a laptop is shown by the black horizontal line at $150 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 laptop at a market price of $150 (Note: If a person will not purchase a laptop at the market price, indicate this by leaving his or her rectangle in its original position on the palette.) 400 mitri 350 Dm Frances 300 250 Frances Jake 200 Market Price Jake w 1 50 Latasha 00 atasha 50 Nick Nick QUANTITY (Laptops) Based on the information on the previous graph, you can tell that will buy laptops at the given market price, and total consumer surplus in this market will be One Consumer Suppose the market price of a laptop increases to $250. two consumers hree cons umers On the following graph, use the rectangles once again to shade th g consumer surplus for each person who is willing and able to four consumers purchase a laptop at the new market price: orange (square symbc n (triangle symbols) for Frances, purple (diamond symbols) for Jake, tan (dash symbols) for Latasha, and blue (circle symbols fo five consumers person will not purchase a laptop at the new market price, indicate this by leaving his or her rectangle in its original position on the parette.

(Decreases/increases) ,(1,2,3,4, 5 customers),(Decreases/increases)

Answer 1

Consumer surplus is the difference between willingness to pay and market price. A consumer will buy the good if market price is less than the willingness to pay

The following diagram is showing the consumer's surplus when the price is $150. Frances 300 Frances Nek The orange shaded portion is the consumer's surplus for Dmitri, the green portion is the consumer's surplus for Frances and the purple portion is the consumer's surplus for Jake.

At the price of S150, Dmitri, Frances and Jack will buy the good. Consumer surplus for Dmriti is: S350 $150 $200 Consumer surplus for Frances is: $300 S150 S150 Consumer surplus for Jake $200- S150 S50 Total consumer surplus = S200 + S 150S50 S400. Three consumers will buy laptops at the given market price and total consumer surplus in the market will be S400

The following diagram is showing the consumer's surplus when the price is $250. Frances 1 0 150 Nok r's surplus for Dmitri, the green po consumer's surplus for Frances.

At price of $250, Dmriti and Frances will buy the laptop. Consumer surplus for Dmriti is: $350-S250-$100 Consumer surplus for Frances is: $300 $250 S50 Total consumer surplus: S100+S50 s150. price of laptop increases to S2 buy a laptop decreases to 2 consumers and total surplus decreases to $150