Chapter 4, Problem 7P

To determine

On Thursday nights, a local restaurant has pasta special. Ari likes the restaurant’s pasta, and his willingness pay for each serving is shown in the accompanying table.

(a)

How much consumer surplus when the price of pasta is $4.

(b)

How much consumer surplus when the price increased to $6.

(c)

How much pasta Ari eats when there is an offer of “all-you-can-eat” at $25.

(d)

What is the highest price we can charge for the “all-you-can-eat” special and still attract customers?

Concept Introduction:

Consumer Surplus:

It is defined as the difference between consumer’s willingness to pay and how much does a consumer pay for the goods and services. It is the area above the price level and below the demand curve.

Producer Surplus:

It is defined as the difference between the amount a producer of a good receives and the minimum amount the producer is willing to accept for the good. It is the area below the price level and above the supply curve.