Question

7. Consumer surplus for an individual and a market The following graph shows Becky's weekly demand for pizza, represented by the blue line. Point A represents point along her weekly demand. The market price of pizza is $3.00 per slice, as shown by the horizontal black line. Becky's Weekly Demand 7.50 6.75 6.00 Demand 5.25 4,50 3.75 Price 3.00 2,25 1.50 0.75 0 0 10 12 14 16 18 20 4 QUANTITY (Slices of pizza) From the previous graph, you can tell that Becky is willing to pay $ for her 8th slice of pizza each week. Since she has to pay only $3.00 per slice, the consumer surplus she gains from the 8th slice of pizza is $ PRICE (Dollars per slice) Suppose the price of pizza were to fall to $2.25 per slice. At this lower price, Becky would receive a consumer surplus of $ from the 8th slice of pizza she buys. The following graph shows the weekly market demand for pizza in a small economy. Use the purple point (diamond symbol) to shade the area representing consumer surplus when the price (P) of pizza is $3.00 per slice. Then, use the green point (triangle symbol) to shade the area representing additional consumer surplus when the price falls to $2.25 per slice. Small Economy's Weekly Demand 7.50 6.75 Initial Consumer Surplus (P-$3.00) 6.00 A Demand 5.25 Additional Consumer Surplus (P=$2.25) 4.50 3.75 P-$3.00 3.00 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 pizza) PRICE (Dollars per slice)

Answer 1

Original Cs 3.75 Price New c 2 2r 2 46 As per demand urve for given above number of piz2a Slices Becky is willins slice of pi22a For 3fh AnsHer Far slice to $3.75 For 8th pay y'SH 6lank willingness to Pay Consumer surplus Market 3 3.75 Aruwer For 2nd blan k $0.75 1F price of slicu of pi2za fall to t 2.25 then Tecky's surplus Far Consumer new slice Nillingness to Pay Consumer Surplus New Martes 3.75-2-25 41.5 Amswer Fo RAblank

Answer 2

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