Market demand and consumers surplus, Managerial Economics

Assignment Help:

Market demand and consumers surplus

Suppose that the market price of a cup of coffee is K£4 but the consumer was willing to pay £9 for the first unit, £8 for the second, £7 for the third, £6 for the fourth, £5 for the fifth and £4 for the sixth.

However, he pays the market price for all the six cups.  The consumer thus earns a surplus on the first five units consumed i.e.

A measure of the difference between the value that consumers place on their total consumption of some commodity and the amount they actually pay for it.

For continuous demand curves, consumer's surplus can be measured by the area under the demand curve and above the price.

758_market demand analysis.png

NB:  The shaded area represents utility which the consumers received but did not pay for i.e. consumer surplus.

Mathematically it can be calculated as follows:

£5 + £4 + £3 + £2 + £1 = £15

*Weaknesses of cardinalist approach


Related Discussions:- Market demand and consumers surplus

Cost Analysis, Michael was discussing the importance of production analysis...

Michael was discussing the importance of production analysis and cost analysis to managerial economics with a final year Open Campus student. The final year student, Catherine, sta

Explain discrete-event simulation, Q. Explain Discrete-event simulation? ...

Q. Explain Discrete-event simulation? Discrete-event simulation: Operation of a system is signified as a chronological sequence of events. Every event take place at an instan

A reduce in supply, a) A reduce in supply and an enhance in demand will cau...

a) A reduce in supply and an enhance in demand will cause the equilibrium:   b)  Which of the following is most likely to cause a reduce in the present demand for  some product X

What is the expected profit, The Barcelona Football Club is considering the...

The Barcelona Football Club is considering the signing of a player of international fame. The problem is that the player has a reputation for having a weak knee. The probability th

Original model again, Thinking about modifications in the model again: Go b...

Thinking about modifications in the model again: Go back to the original model again, but add a marginal propensity to invest, this is, suppose  that I = f ( i and Y). The MPI is d

Un''s integrated programme for commodities, The UN's Integrated Programme f...

The UN's Integrated Programme for Commodities Most of the political pressure for ICAs comes from spokesmen for the developing countries.  This is reflected in countless resolu

Expected price per product, Airbus Boeing Deman...

Airbus Boeing Demand P = 182.868 - 0.0003Q P = 198.6592 - 0.00013Q TVC Curve TVC = 104.8822Q - 0.001Q^2 + 0

discuss opportunity cost-explicit and implicit costs, Discuss and analyz...

Discuss and analyze following statement: When Burton Cummings graduated with honors from the Canadian Trucking Academy, his father gave him a $350,000 tractor-trailer rig. Rec

Gatt & wto, introduction, evaluation,principle, activities concept behind G...

introduction, evaluation,principle, activities concept behind Gatt & wto

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd