It is a hot day, and Larry is thirsty. Here is the value he places on.docx

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It is a hot day, and Larry is thirsty. Here is the value he places on a bottle of water: Value of first bottle: $7 Value of second bottle: $5 Value of third bottle: $3 Value of fourth bottle: $1 From this information, complete the following table by deriving Larry's demand schedule. Quantity Demanded Price More than $7 $5.01 to $7 $3.01 to $5 $1.01 to $3 $1 or fewer Based on Larry's willingness to pay, plot Larry's demand curve as a step function on the following graph using blue points (circle symbol) beginning at a quantity of O bottles of water. Larry's Demand Price = $4 Price of Water Quantity Purchased A Consumer Surplus 3 4 5
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Unformatted text preview: 2 Quantity of Water Suppose the price of a bottle of water is $4. Use the black line (plus symbol) to draw a price line at $4. Next use the grey point (star symbol) to indicate how many bottles of water Larry will buy at that price. Finally, use the green point (triangle symbol) to shade the area that represents Larry's consumer surplus from his purchases. In this case, Larry receives $ in consumer surplus from his we decreases increases bottles of water. This his consumer If the price falls to $2, Larry now buys surplus to $...
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