### Market Demand and Consumer SurplusNow, suppose another buyer, Neha, enters the market for apartments, and her willingness to pay is $490,000.**Instructions:**Based on Neha’s and Lorenzo’s respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbols). Next, shade Lorenzo’s consumer surplus using the green rectangle (triangle symbols), and shade Neha’s consumer surplus using 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 the points automatically.**Graph Explanation:**- **X-axis:** This axis typically represents the quantity of apartments, although it is not labeled in the image.- **Y-axis (PRICE - thousands of dollars):** The price of apartments is depicted on this axis, ranging from $70,000 to $560,000.- **Market Price:** A horizontal black line is drawn at around the $350,000 mark, indicating the market price for the apartments.**Key:**- **Blue Circle Symbol:** Represents the demand curve.- **Green Triangle Symbol:** Represents Lorenzo’s consumer surplus.- **Purple Diamond Symbol:** Represents Neha’s consumer surplus.In the graph, locate the points where the respective consumer surpluses (Lorenzo's and Neha's) would be shaded, based on their willingness to pay and the market price. Plot these points forming a step function and connect them to visualize the demand curve. ### Understanding Consumer Surplus in the Apartment Market#### Scenario:Consider the market for apartments. The market price of each apartment is $350,000, and each buyer demands no more than one apartment.Suppose that Lorenzo is the only consumer in the apartment market. His willingness to pay for an apartment is $560,000. Based on Lorenzo's willingness to pay, the following graph shows his demand curve for apartments.#### Task:Shade the area representing Lorenzo's consumer surplus using the green rectangle (triangle symbols).#### Graph Explanation:The graph illustrates Lorenzo's Demand for apartments. Here’s a detailed analysis:1. **Axes**: - The horizontal axis (x-axis) represents the quantity of apartments. - The vertical axis (y-axis) represents the price in thousands of dollars.2. **Demand Curve**: - Lorenzo's demand curve is a vertical line at the quantity of 1 apartment, going up to his willingness to pay, which is $560,000.3. **Market Price Line**: - A horizontal line is drawn at the market price level, which is $350,000 and is labeled as "Market Price".4. **Consumer Surplus**: - **Consumer surplus** is the difference between what consumers are willing to pay for a good or service (Lorenzo’s willingness to pay) and what they actually pay (market price). - Represented as the area between the demand curve and the market price line, up to the quantity of 1 apartment. 5. **Shaded Area**: - The shaded area (using the green rectangle) represents Lorenzo's consumer surplus, the difference between the $560,000 he is willing to pay and the $350,000 market price. - The consumer surplus can be calculated as follows: $560,000 - $350,000 = $210,000.This example helps in understanding the concept of consumer surplus in a straightforward market scenario. Lorenzo benefits from a consumer surplus when he pays less than what he is willing to pay for an apartment.

The measure that depicts the difference between the price that consumers are willing to pay and the…

Now, suppose another buyer, Neha, enters the market for apartments, and her willingness to pay is $490,000. Based on Neha's and Lorenzo's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Lorenzo's consumer surplus using the green rectangle (triangle symbols), and shade Neha's consumer surplus using 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 the points automatically. ?

Now, suppose another buyer, Neha, enters the market for apartments, and her willingness to pay is $490,000. Based on Neha's and Lorenzo's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Lorenzo's consumer surplus using the green rectangle (triangle symbols), and shade Neha's consumer surplus using 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 the points automatically. ?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter5: Markets In Motion And Price Controls

Section: Chapter Questions

Problem 10P

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