Illustrate the consumer surplus that occurs

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Reference no: EM13159982

Suppose the linear demand curve for shirts slopes downward and the consumers buy 500 shirts per year when the price is 30 and 1,000 shirts per year when the price is 25

a. Compared to the prices of 30 and 25, what can you say about the marginal valuation that consumers place on the 300th shirt, the 700th shirt, nad the 1,200 shirt they might buy each year?

b. With diminishing marginal utility, are consumers deriving any consumer surplus if the price is 25 per shirt? Explain

c. Usse a market demand curve to illustrate the change in consumer surplus if the price drops from 30 to 25

Consumer Surplus

Suppose supply of a good id perfectly elastic at a price of 5 The market demand curve for this good is linear, with zero quantity demanded at a price of 25 Given that the slope of this linear demand curve is -0.25, draw a supply and demand graph to illustrate the consumer surplus that occurs when the market is in equilibrium

Reference no: EM13159982

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