Question

1. Assuming $5 to be the equilibrium price for this market, please shade in Consumer Surplus (CS), Producer Surplus (PS), and Total Surplus (TS). 2. Assume Felix is willing to pay $8 for a pizza cutter. Tim also wants one, but would only be willing to pay $6 for one. At a pizza baker\'s convention, Felix buys the last pizza cutter at the market price just before Tim could buy it. Tim contacts the convention organizers and complains about missing out on the last pizza cutter. The organizers refund Felix for the pizza cutter and allow Tim to buy it at the market price. What happens as a result of this move?

Answer 1

Figure 1.1 shows about Consumer Surplus (CS), Producer Surplus (PS), and To Surplus (TS) Figure 1.1 10 Supply curve 9 Con sumer 6 Surplus Equilibpium point Total Surplus 4Producer Surplus 3 Demand curve 0 3 4 5 6789 10 2 Quantity of pizza demanded Quantity of pizza supplied Calculate Consumer Surplus (CS) Consumer Surplus (CS)--X (4-0) x(9-5) -x4x4

Calculate Producer Surplus (PS): Producer Surplus (PS)4-0)x(5-1) =-x4x4 Calculate Total Surplus (TS): Total Surplus (TS) Consumer Surplus (CS)-Producer Surplus (PS) $8 + $8 - S16 2) Result of this move is: Since willingness to pay decreases then Consumer Surplus (CS) decreases.