Asked by Chantal Barry on May 01, 2024
Verified
Suppose the market demand for TV remotes is given by the equation Qd = 100 - 2P,where P is the price and Qd is the number of TV remotes.If the market price of TV remotes is $40,then the quantity demanded equals _____ and the value of consumer surplus is _____.
A) 20;$100
B) 100;$20
C) 40;$200
D) 2;$40
Consumer Surplus
The difference as marked by what consumers are prepared to spend on a good or service versus the actual payment made.
Market Demand
The total quantity of a good or service that all consumers in a market are willing and able to purchase at various prices.
- Familiarize oneself with the notion of total surplus, including consumer surplus and producer surplus.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
A
Explanation :
If the price of a TV remote is $40, we can plug this value into the demand equation to find the quantity demanded:
Qd = 100 - 2P
Qd = 100 - 2($40)
Qd = 20
Therefore, the quantity demanded is 20 TV remotes.
To find consumer surplus, we need to find the area below the demand curve and above the price paid by consumers (which in this case is $40). Since this is a rectangular demand curve, we can use the formula for the area of a rectangle to find consumer surplus:
Consumer Surplus = (Price Paid by Consumers - Lowest Possible Price) x Quantity Demanded / 2
Consumer Surplus = ($40 - $0) x 20 / 2
Consumer Surplus = $400 / 2
Consumer Surplus = $200
Therefore, the value of consumer surplus is $200. Choice A is the correct answer.
Qd = 100 - 2P
Qd = 100 - 2($40)
Qd = 20
Therefore, the quantity demanded is 20 TV remotes.
To find consumer surplus, we need to find the area below the demand curve and above the price paid by consumers (which in this case is $40). Since this is a rectangular demand curve, we can use the formula for the area of a rectangle to find consumer surplus:
Consumer Surplus = (Price Paid by Consumers - Lowest Possible Price) x Quantity Demanded / 2
Consumer Surplus = ($40 - $0) x 20 / 2
Consumer Surplus = $400 / 2
Consumer Surplus = $200
Therefore, the value of consumer surplus is $200. Choice A is the correct answer.
Learning Objectives
- Familiarize oneself with the notion of total surplus, including consumer surplus and producer surplus.
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