Supply and Demand
1. award: 1.50 out of
2.50 points
The demand curve for product X is given by QXd = 500 - 5PX.
a. Find the inverse demand curve.
PX = 100 - 0.2 QXd
Instructions: Round your answer to the nearest penny (2 decimal places).
b. How much consumer surplus do consumers receive when Px = $45?
$91.00
c. How much consumer surplus do consumers receive when Px = $25?
$95.00
d. In general, what happens to the level of consumer surplus as the price of a good falls?
The level of consumer surplus increases as the price of a good falls.
ebook & resources
Demand
Market Equilibrium
Worksheet
Learning Objective: 02-02 Calculate consumer surplus and producer surplus, and describe what they mean.
The demand curve for product X is given by QXd = 500 - 5PX.
a. Find the inverse demand curve.
PX = - QXd
Instructions: Round your answer to the nearest penny (2 decimal places).
b. How much consumer surplus do consumers receive when Px = $45?
$
c. How much consumer surplus do consumers receive when Px = $25?
$
d. In general, what happens to the level of consumer surplus as the price of a good falls?
The level of consumer surplus increases as the price of a good falls.
Explanation:
a. Solve the demand function for Px to obtain the following inverse demand function: PX = 100 - 0.2QXd.
b. Notice that when Px = $45, QXd = 500 - 5(45) = 275 units. Also, from part a, we know the vertical intercept of the inverse demand equation is 100. Thus, consumer surplus is $7,562.50 (computed as (0.5)($100 - $45)275 = $7,562.50).
c. When price decreases to $25, quantity demanded increases to 375 units, so consumer surplus increases to $14,062.50 (computed as (0.5)($100-$25)375 = $14,062.50).
d. So long as the law of demand holds, a decrease in price leads to an increase in consumer surplus, and vice versa. In general, there is an inverse relationship between the price of a product and consumer surplus.
2.
award:
1.51 out of
2.50 points
You are the manager of an
2.50 points
The demand curve for product X is given by QXd = 500 - 5PX.
a. Find the inverse demand curve.
PX = 100 - 0.2 QXd
Instructions: Round your answer to the nearest penny (2 decimal places).
b. How much consumer surplus do consumers receive when Px = $45?
$91.00
c. How much consumer surplus do consumers receive when Px = $25?
$95.00
d. In general, what happens to the level of consumer surplus as the price of a good falls?
The level of consumer surplus increases as the price of a good falls.
ebook & resources
Demand
Market Equilibrium
Worksheet
Learning Objective: 02-02 Calculate consumer surplus and producer surplus, and describe what they mean.
The demand curve for product X is given by QXd = 500 - 5PX.
a. Find the inverse demand curve.
PX = - QXd
Instructions: Round your answer to the nearest penny (2 decimal places).
b. How much consumer surplus do consumers receive when Px = $45?
$
c. How much consumer surplus do consumers receive when Px = $25?
$
d. In general, what happens to the level of consumer surplus as the price of a good falls?
The level of consumer surplus increases as the price of a good falls.
Explanation:
a. Solve the demand function for Px to obtain the following inverse demand function: PX = 100 - 0.2QXd.
b. Notice that when Px = $45, QXd = 500 - 5(45) = 275 units. Also, from part a, we know the vertical intercept of the inverse demand equation is 100. Thus, consumer surplus is $7,562.50 (computed as (0.5)($100 - $45)275 = $7,562.50).
c. When price decreases to $25, quantity demanded increases to 375 units, so consumer surplus increases to $14,062.50 (computed as (0.5)($100-$25)375 = $14,062.50).
d. So long as the law of demand holds, a decrease in price leads to an increase in consumer surplus, and vice versa. In general, there is an inverse relationship between the price of a product and consumer surplus.
2.
award:
1.51 out of
2.50 points
You are the manager of an