The marginal valuation of the good, establish the consumer surplus and derive the demand curve. Concept Introduction: Consumer Surplus – The excess of consumers’ willingness to pay over what they actually pay (the ability to pay) for a good or service relative to the market price is the economic measure of consumer benefit known as the consumer surplus. Law of demand – The law states that as the price of a commodity falls its quantity demanded increases and vice versa, assuming all other variables to be constant. Linear Demand Equation – It expresses the quantity demanded as a function of price in the form, Qd= b + mp where b is the intercept and the slope m is constant. In other words, change in Qd with a one unit change in price is constant for a linear demand function. Law of Diminishing Marginal Utility – The law states that we consume more and more of a commodity, keeping the consumption of all other variables constant, the utility derived from the consumption of every additional unit diminishes. The marginal utility thus diminishes.

Question

Angelo: Marijuana should be legalized A.All of Angelo’s friends smoke marijuana.b.Legalizing marijuana would reduce the consumption of marijuana and save lives, money, and resources.c.Angelo has already said on television that marijuana should be legalized.d.Angelo likes to smoke marijuana

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Question

Chapter 6, Problem 3.7P

To determine

The marginal valuation of the good, establish the consumer surplus and derive the demand curve.

Concept Introduction:

Consumer Surplus – The excess of consumers’ willingness to pay over what they actually pay (the ability to pay) for a good or service relative to the market price is the economic measure of consumer benefit known as the consumer surplus.

Law of demand – The law states that as the price of a commodity falls its quantity demanded increases and vice versa, assuming all other variables to be constant.

Linear Demand Equation – It expresses the quantity demanded as a function of price in the form, Qd= b + mp where b is the intercept and the slope m is constant. In other words, change in Qd with a one unit change in price is constant for a linear demand function.

Law of Diminishing Marginal Utility – The law states that we consume more and more of a commodity, keeping the consumption of all other variables constant, the utility derived from the consumption of every additional unit diminishes. The marginal utility thus diminishes.

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