Homework Help is Here – Start Your Trial Now!
Business
Economics
Suppose Kenji is willing to pay a total of $180,000 for an antique car. True or False: Keeping his maximum willingness to pay for an antique car in mind, Kenji will buy the antique car because it would be worth more to him than its market price of $225,000

Suppose Kenji is willing to pay a total of $180,000 for an antique car. True or False: Keeping his maximum willingness to pay for an antique car in mind, Kenji will buy the antique car because it would be worth more to him than its market price of $225,000

Microeconomics: Principles & Policy
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter5: Consumer Choice: Individual And Market Demand
Section: Chapter Questions
Problem 6TY
See similar textbooks
icon
Related questions
Question
Suppose Kenji is willing to pay a total of $180,000 for an antique car.
True or False: Keeping his maximum willingness to pay for an antique car in mind, Kenji will buy the antique car because it would be worth more to him than its market price of $225,000.
 
True
 
False
### 2. Individual Demand and Consumer Surplus Consider the market for antique cars. The market price of each antique car is $225,000, and each buyer demands no more than one antique car. Suppose that Eric is the only consumer in the antique car market. His willingness to pay for an antique car is $360,000. Based on Eric's willingness to pay, the following graph shows his demand curve for antique cars. Shade the area representing Eric's consumer surplus using the green rectangle (triangle symbols). #### Graph Description: - **Axes:** - The vertical axis represents the PRICE in thousands of dollars. - The horizontal axis is the quantity axis, which is not labeled in this case since the focus is on individual demand. - **Lines and Points:** - **Eric’s Demand Curve**: Illustrated with a horizontal blue line at $360,000, indicating his maximum willingness to pay. - **Market Price**: Shown with a horizontal black line at $225,000, representing the price Eric pays. - **Consumer Surplus:** - The area of Eric's consumer surplus is shaded in green, forming a rectangle. It is bounded vertically by the market price ($225,000) and Eric’s maximum willingness to pay ($360,000), and horizontally by the quantity of 1 car.
Transcribed Image Text:### 2. Individual Demand and Consumer Surplus Consider the market for antique cars. The market price of each antique car is $225,000, and each buyer demands no more than one antique car. Suppose that Eric is the only consumer in the antique car market. His willingness to pay for an antique car is $360,000. Based on Eric's willingness to pay, the following graph shows his demand curve for antique cars. Shade the area representing Eric's consumer surplus using the green rectangle (triangle symbols). #### Graph Description: - **Axes:** - The vertical axis represents the PRICE in thousands of dollars. - The horizontal axis is the quantity axis, which is not labeled in this case since the focus is on individual demand. - **Lines and Points:** - **Eric’s Demand Curve**: Illustrated with a horizontal blue line at $360,000, indicating his maximum willingness to pay. - **Market Price**: Shown with a horizontal black line at $225,000, representing the price Eric pays. - **Consumer Surplus:** - The area of Eric's consumer surplus is shaded in green, forming a rectangle. It is bounded vertically by the market price ($225,000) and Eric’s maximum willingness to pay ($360,000), and horizontally by the quantity of 1 car.
Now, suppose another buyer, Ginny, enters the market for antique cars, and her willingness to pay is $315,000. **Based on Ginny's and Eric's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Eric's consumer surplus using the green rectangle (triangle symbols), and shade Ginny'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 Analysis The graph presents a demand curve for antique cars with price on the vertical axis labeled in thousands of dollars, ranging from $0 to $360,000, and quantity on the horizontal axis. - **Demand Curve:** - Represented by blue circles, the demand curve has points plotted at (0, 360), (1, 360), (1, 315), (2, 315), and (2, 0). - These points illustrate the quantity of cars demanded at varying price levels. - **Market Price:** - Indicated by a horizontal black line labeled "Market Price" positioned at $225,000. - **Eric's Consumer Surplus:** - Shaded in green with triangle symbols, this area is between the prices of $225,000 and $360,000 and covers a quantity from 0 to 1. This shows the additional value Eric gains from paying less than his willingness to pay. - **Ginny's Consumer Surplus:** - Shaded in purple with diamond symbols, this area is between the prices of $225,000 and $315,000 and covers a quantity from 1 to 2. This shows the additional value Ginny gains from paying less than her willingness to pay. **Legend:** - Gray symbols indicate the representation on the graph: - Demand Curve (circle) - Eric's Consumer Surplus (triangle) - Ginny's Consumer Surplus (diamond)
Transcribed Image Text:Now, suppose another buyer, Ginny, enters the market for antique cars, and her willingness to pay is $315,000. **Based on Ginny's and Eric's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Eric's consumer surplus using the green rectangle (triangle symbols), and shade Ginny'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 Analysis The graph presents a demand curve for antique cars with price on the vertical axis labeled in thousands of dollars, ranging from $0 to $360,000, and quantity on the horizontal axis. - **Demand Curve:** - Represented by blue circles, the demand curve has points plotted at (0, 360), (1, 360), (1, 315), (2, 315), and (2, 0). - These points illustrate the quantity of cars demanded at varying price levels. - **Market Price:** - Indicated by a horizontal black line labeled "Market Price" positioned at $225,000. - **Eric's Consumer Surplus:** - Shaded in green with triangle symbols, this area is between the prices of $225,000 and $360,000 and covers a quantity from 0 to 1. This shows the additional value Eric gains from paying less than his willingness to pay. - **Ginny's Consumer Surplus:** - Shaded in purple with diamond symbols, this area is between the prices of $225,000 and $315,000 and covers a quantity from 1 to 2. This shows the additional value Ginny gains from paying less than her willingness to pay. **Legend:** - Gray symbols indicate the representation on the graph: - Demand Curve (circle) - Eric's Consumer Surplus (triangle) - Ginny's Consumer Surplus (diamond)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Decision Tree
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Microeconomics: Principles & Policy
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning
Economics (MindTap Course List)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Macroeconomics
Macroeconomics
Economics
ISBN:
9781337617390
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Microeconomics
Microeconomics
Economics
ISBN:
9781337617406
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Micro Economics For Today
Micro Economics For Today
Economics
ISBN:
9781337613064
Author:
Tucker, Irvin B.
Publisher:
Cengage,
Exploring Economics
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
SEE MORE TEXTBOOKS