Answered: onsider the supply and demand curves…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the supply and demand curves for taxi rides in the attached graph. At the quantity of 240 consumers marginal willingness to pay is______ and the marginal cost of taxi rides is_______per mile

3.50
2.50
1.83
1.30
OL
I
1
1
1
240
1
==
400
1
1
600
Quantity of taxi rides (millions of miles)
O
AV
S
840
hulu
7
C
C
C

Expert Solution

Step 1

We know that the demand curve represents the consumer's marginal willingness to pay for a good or service. That is why the demand curve is called the marginal willingness to pay curve.

Also, the supply curve represents the minimum willingness to accept a product or service which is equal to the marginal cost of the product. Thus the supply curve is nothing but the upward slopping marginal curve.

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