Suppose that a 27% postal (stamp) price increase would reduce postal revenue by $851 million and lower consumer surplus by $1,419.64 million. Illustrate these results in a figure, and indicate the dollar amounts of areas A and B in the figure. Assume that there is a constant elasticity of demand function, Q=3,505 291p- 1.6 and that the price of a first-class stamp went from $o.37 to $0.47. 1.) Using the rectangle drawing tool and the triangle drawing tool each once, shade in the approximate area of the decrease in consumer surplus. Label these "ACSRectangle and ACSTriangle 2) Using the rectangle drawing tool twice, shade in the area of the change in postal revenue. Label these 'ARevenuepecrease' and ARevenuencrease Carefully follow the instructions above, and only draw the required objects. The size of area A is A= s million. (Enter your response rounded to two decimal places.) The exact size of area B is B=S million. (Enter your response rounded to two decimal places.)
Suppose that a 27% postal (stamp) price increase would reduce postal revenue by $851 million and lower consumer surplus by $1,419.64 million. Illustrate these results in a figure, and indicate the dollar amounts of areas A and B in the figure. Assume that there is a constant elasticity of demand function, Q=3,505 291p- 1.6 and that the price of a first-class stamp went from $o.37 to $0.47. 1.) Using the rectangle drawing tool and the triangle drawing tool each once, shade in the approximate area of the decrease in consumer surplus. Label these "ACSRectangle and ACSTriangle 2) Using the rectangle drawing tool twice, shade in the area of the change in postal revenue. Label these 'ARevenuepecrease' and ARevenuencrease Carefully follow the instructions above, and only draw the required objects. The size of area A is A= s million. (Enter your response rounded to two decimal places.) The exact size of area B is B=S million. (Enter your response rounded to two decimal places.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
N5
Transcribed Image Text:Suppose that a 27% postal (stamp) price increase would reduce postal revenue by $851 million and lower consumer surplus by $1,419.64 million. Illustrate these
results in a figure, and indicate the dollar amounts of areas A and B in the figure.
P2
Assume that there is a constant elasticity of demand function,
A
Q = 3,505.291p- 1.6
P1
and that the price of a first-class stamp went from $0.37 to $0.47.
1.) Using the rectangle drawing tool and the triangle drawing tool each once, shade in the approximate area of the decrease in consumer surplus. Label these
'ACSRectangle and 'ACSTriangle
2.) Using the rectangle drawing tool twice, shade in the area of the change in postal revenue. Label these 'ARevenuepecrease' and ARevenue ncrease
Carefully follow the instructions above, and only draw the required objects.
The size of area A is
A = S million.
Q2
Q1
Quantity
(Enter your response rounded to two decimal places.)
The exact size of area B is
B = S million.
(Enter your response rounded to two decimal places.)
Price
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