2. Individual demand and consumer surplusConsider the market for yachts. The market price of each yacht is $105,000, and each buyer demands no more than one yacht.Suppose that Edison is the only consumer in the yacht market. His willingness to pay for a yacht is $210,000. Based on Edison'swillingness to pay, the following graph shows his demand curve for yachts.Shade the area representing Edison's consumer surplus using the green rectangle (triangle symbols).200245Edison's Consumer SurplusEdison's Demand210 A140Market Price105 A70353QUANTITY (Yschts)Now, suppose another buyer, Hilary, enters the market for yachts, and her willingness to pay is $140,000.PRICE (Thousands of dollars) Based on Hilary's and Edison's respective willingness to pay, plot the market demand curve on the following graph using the blue points(circle symbol). Next, shade Edison's consumer surplus using the green rectangle (triangle symbols), and shade Hilary's consumer surplususing the purple rectangle (diamond symbols).Note: Plot your points as a step function in the order in which you would like them connected. Line segments will connect thepoints automatically.280245Demand Curve210175Edison's Consumer Surplus140Market Price105Hilary's Consumer Surplus7035QUANTITY (Yschts)Suppose Kevin is willing to pay a total of $70,000 for a yacht.True or False: Keeping his maximum willingness to pay for a yacht in mind, Kevin will buy the yacht because it would be worthmore to him than its market price of $105,000.O TrueO FalsePRICE (Thousands of dollars)

Consumer surplus is the area above the price line and under the demand curve.…

Consider the market for yachts. The market price of each yacht is $105,000, and each buyer demands no more than one yacht. Suppose that Edison is the only consumer in the yacht market. His willingness to pay for a yacht is $210,000. Based on Edison's willingness to pay, the following graph shows his demand curve for yachts. Shade the area representing Edison's consumer surplus using the green rectangle (triangle symbols). 200 245 Edison's Consumer Surplus

Consider the market for yachts. The market price of each yacht is $105,000, and each buyer demands no more than one yacht. Suppose that Edison is the only consumer in the yacht market. His willingness to pay for a yacht is $210,000. Based on Edison's willingness to pay, the following graph shows his demand curve for yachts. Shade the area representing Edison's consumer surplus using the green rectangle (triangle symbols). 200 245 Edison's Consumer Surplus

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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