It is a hot day, and Elmo is thirsty. Here is the value he places on each bottle of water. Value of 1st bottle $8 $6 $4 $2 Value of 2nd bottle Value of 3rd bottle Value of 4th bottle a) From this information, derive Elmo's demand schedule. Graph his demand curve for bottled water. (Hint: it's a step function.) ( b) If the price of a bottle of water is $5, how many bottles does Elmo buy? How much consumer surplus does Elmo get from his purchases? Shows Elmo's consumer surplus in your graph. c) If the price falls to $3 how does quantity demanded change? How does Elmo's consumer surplus change? Show these changes in your graph. If the price rises to $9. how much consumer surplus does Elmo get?
It is a hot day, and Elmo is thirsty. Here is the value he places on each bottle of water. Value of 1st bottle $8 $6 $4 $2 Value of 2nd bottle Value of 3rd bottle Value of 4th bottle a) From this information, derive Elmo's demand schedule. Graph his demand curve for bottled water. (Hint: it's a step function.) ( b) If the price of a bottle of water is $5, how many bottles does Elmo buy? How much consumer surplus does Elmo get from his purchases? Shows Elmo's consumer surplus in your graph. c) If the price falls to $3 how does quantity demanded change? How does Elmo's consumer surplus change? Show these changes in your graph. If the price rises to $9. how much consumer surplus does Elmo get?
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter5: Elasticity
Section: Chapter Questions
Problem 31CTQ: Economists define normal goods as having a positive income elasticity. We can divide normal goods...
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Transcribed Image Text:It is a hot day, and Elmo is thirsty. Here is the value he places on each bottle of water.
Value of 1st bottle
$8
Value of 2nd bottle
$6
Value of 3rd bottle
$4
Value of 4th bottle
$2
a) From this information, derive Elmo's demand schedule. Graph his demand curve
for bottled water. (Hint: it's a step function.)
b)
If the price of a bottle of water is $5, how many bottles does Elmo buy? How
much consumer surplus does Elmo get from his purchases? Shows Elmo's
consumer surplus in your graph.
c)
If the price falls to $3 how does quantity demanded change? How does Elmo's
consumer surplus change? Show these changes in your graph.
d)
If the price rises to $9, how much consumer surplus does Elmo get?
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