TABLE D. 1. Explain in detail what consumer surplus is, taking into account relationship between the demand curve and the willingness to pay and show how it is

Chapter 7

1. Explain in detail what consumer surplus is, taking into account relationship between the demand curve and the willingness to pay and show how it is measured?

2. Megan loves donuts. The table shown reflects the value Megan places on each donut she eats:

Value of first donut $.60

Value of second donut $.50

Value of third donut $.40

Value of fourth donut $.30

Value of fifth donut $.20

Value of sixth donut $.10

a. Use this information to construct Megan’s demand curve for donuts.

b. If the price of donuts is $.20, how many donuts will Megan buy?

c. Show Megan’s consumer surplus on your graph. How much consumer surplus would she have at a price of $.20?

d. If the price of donuts rose to $.40, how many donuts would she purchase now? What would happen to Megan’s consumer surplus? Show this change on your graph.

3. Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

4.

TABLE C

Seller Cost

Jonathan $400

Joshua 300

Jessica 200

Ashley 100

a. Use the information in the Table C to fill in the blanks of Table D.

TABLE D

Price Sellers Quantity Supplied

$400 or more ________________ ________

300 to 400 ________________ ________

200 to 300 ________________ ________

100 to 200 ________________ ________

Less than $100 ________________ ________

b. Use the information in Table C to graph a supply curve for this product.

5. Explain why the graph shown verifies the fact that the market equilibrium (quantity) maximizes the sum of producer and consumer surplus.

6. What are the economic arguments in favor of allowing ticket scalping? Explain briefly the whole story if you wish.

7. Be ready to explain all Key Concepts on the last page of the chapter.

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