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Homework #3
Problem 1
Q
d
= 11
p
4
discrete, i.e assume that you can attend half an opera, etc.
that Fred is forced to attend these operas and pay for the tickets whether he
wants to or not.
a.
b.
1
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How much consumers surplus does Fred get from attending all 5 operas?
Graph this relationship. Depict the CS.
Problem 2
2
curve for minutes of cell phone usage is given by the following equation:
Q
d
= 750
3000
p
He is choosing between 3 di/erent cell phone plans.
Under plan A, he gets
1000 minutes a month for a fee of $60.
Each minute up to 1000 costs
nothing beyond the monthly fee. Under plan T, each minute of use costs
15 cents, but there is no monthly fee.
a.
Using CS, which plan should Tom choose?
answer
Calculate the CS under each plan
Plan A:
Q
= 750
;CS
=
(
:
25
0)
±
750
2
60 = 33
:
75
Plan T:
Q
= 750
30(
:
15) = 300
;CS
=
(
:
25
:
15)
±
300
2
= 15
So Tom should choose plan A.
b.
Suppose that Tom can also choose plan S. Under plan S, he gets 450 free
minutes for a monthly fee of $40. Each minute above 450 costs 11 cents.
1)
How many minutes will Tom use? Which plan should he choose?
This one is a bit tricky. How many minutes will Tom use? Well, he gets 450
minutes free. What is his willingness to pay for the 451st minute?
450
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This note was uploaded on 02/20/2012 for the course ECON 221 taught by Professor Gordanier during the Fall '08 term at South Carolina.
 Fall '08
 GORDANIER
 Consumer Surplus

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