ECO 365 Exam Guide: Consumer Surplus Topics

ECO 365 Final Exam Answer Guide for Consumer Surplus

Consumer surplus occurs when the price a consumer actually pays is less than they are willing to pay for a given product. The demand curve indicates the price consumers are willing to pay for goods at various quantities based on their expectations for value or utility. 

The exhibit given below shows the demand curve for Good X, labeled D

The exhibit given below shows the demand curve for Good X, labeled D. At a price of $8 per unit, the quantity demanded of Good X is 5 units. A decrease in price to $4 per unit increases the quantity demanded to 8 units. Assuming that a decrease in price leads to new consumers buying the good, what is the consumer surplus received by the new consumers in the market?

The exhibit given below shows the demand curve for Good X, labeled D

The exhibit given below shows the demand curve for Good X, labeled D

$3

Explanation: The consumer surplus is the area located in the small triangle in the photo above. This problem is solved by taking the length of the base (3) and the height (2), then finding the area with the formula A = (h*b) /2). So 3*2 / 2 = $3 surplus.

The table given below shows three buyers willingness to pay for an antique necklace

The table given below shows three buyers willingness to pay for an antique necklace. At a market price of $25,000, the total consumer surplus in the market is:

$6,000

Explanation: Solve this problem by taking the total amount that consumers are willing to pay above the equilibrium price of $25,000. Kristin will pay $5K, plus another 1K from Kristin.

Adrianne and Joanna love watching plays on Broadway

Adrianne values a play at $85, and Joanna values it as $82. When the price of tickets increased from $80 to $83 following the imposition of a tax, Joanna stopped watching plays on Broadway, while Adrianne continued to buy tickets. Identify the correct statement

The decrease in Adrianne’s consumer surplus is equal to the dead weight loss

Explanation: After the tax, the consumer surplus for Adrianne is $2, which is exactly $2 more than maximum amount of revenue that could be generated in this scenario

 
  • Student: Sandy Lopez
  • Textbook:  Principles of Microeconomics
  • Course: ECO 365 Microeconomics 2017 Final Exam
 

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  • Maria Singian

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