HW chap 6-1

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Unformatted text preview: 0.5. This is where the demand curve intersects the vertical axis. Consumer surplus is the net benefit a consumer receives from participating in the market for a good. Graphically, it is equal to the area under the demand curve and above the price. When the price is $2.00, the quantity demanded equals: S = 525 – 50(2.00) S = 525 – 100.00 S = 425.00. Consumer surplus (CS) initially equals the area of a triangle with a base equal to 425.00 and a height equal to the difference in the 10.5 vertical intercept and the $2.00 price: CS = 0.5(425.00)(10.5 – 2.00) CS = 0.5(425.00)(8.50) CS = 1,806.25. When the price is $3.50, the quantity demanded equals: S = 525 – 50(3.50) S = 525 – 175.00 S = 350.00. Consumer surplus (CS) initially equals the area of a triangle with a base equal to 350.00 and a height equal to the difference in the 10.5 vertical intercept and the $3.50 price: CS = 0.5(350.00)(10.5 – 3.50) CS = 0.5(350.00)(7.00) CS = 1,225.00. The change in c...
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