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

Johnny brought $39.50 to the art supply store. He bought a brush, a sketchbook, and a paint set. The brush was 1 6 as much as the sketchbook, and the sketchbook cost 3 4 the cost of the paint set. Johnny had $2.00 left over after buying these items.

Answer 1

Question

Chapter 6, Problem 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.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

Johnny brought $39.50 to the art supply store. He bought a brush, a sketchbook, and a paint set. The brush was 1 6 as much as the sketchbook, and the sketchbook cost 3 4 the cost of the paint set. Johnny had $2.00 left over after buying these items.

A young woman plans to retire early in 25 years. She believes she can save $10,000 each year starting now. If she plans to begin withdrawing money one year after she makes her last payment into the retirement account (i.e., in the 26th year), what uniform amount could she withdraw each year for 30 years, if the account earns an interest rate of 8% per year? a) Correctly plot the cash flow diagram with its respective vectors, arrowheads, units, and currency values. b) Correct mathematical approach and development, use of compound interest factors.c) Financial logic in the development of the exercise and application of the concept of time value of money. d) Final numerical answer and writing in prose with a minimum of 20 words and a maximum of 50 words of the obtained numerical interpretation.

A hospital charges $200 for a medical procedure, and 1,000 patients use the service. The hospital raises the price to $250, and the number of patients drops to 900. Calculate the price elasticity of demand (PED) and explain your answer. (show all working) Briefly explain how elasticity affects government health policies in the following cases: • Taxes on unhealthy products (cigarettes, alcohol, sugary drinks) • Subsidizing Preventive Care (e.g., vaccines, screenings) Drug Price Controls & Generic Substitutions Co-Payments & Insurance Design