How willingness to pay, consumer surplus , and demand curve are related.

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Answer 1

Question

Chapter 7, Problem 1QR

To determine

How willingness to pay, consumer surplus, and demand curve are related.

Expert Solution & Answer

Explanation of Solution

The consumer surplus is the difference between the maximum willing to pay price by the consumer and the actual paying price of the consumer. The maximum willing to pay price is the price that the consumer gives to the commodity. When the consumer values the good most, he will be ready to pay the highest willing to pay price and vice versa. Thus, the willingness to pay, the consumer surplus, and the demand curve are closely related with each other.

The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest willing to pay price of the consumer and the actual price that the consumer pays.

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Short Description Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS and AD1 intersect at (280, 85) a. How much does aggregate demand need to change to restore the…

Fiscal Policy Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 1000 billion dollars with an increment of 50 billion dollars, and the y-axis is scaled from 0 to 180 units with an increment of 10 units. Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (200, 40)Point 2 at (800, 160)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (200, 160)Point 2 at (800, 40)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (350, 170)Point 2 at (900, 60)A vertical Long-run Aggregate Supply, LRAS line with two endpoints:Point 1 at (500, 170)Point 2 at (500, 0)Two Reference Points:Lines AS and AD1 intersect at (600, 120)Lines AS, AD, and LRAS intersect at (500, 100) a. How much does aggregate demand need to change to restore the…

a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.95. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.

Answer 2

Question

Chapter 7, Problem 1QR

To determine

How willingness to pay, consumer surplus, and demand curve are related.

Expert Solution & Answer

Explanation of Solution

The consumer surplus is the difference between the maximum willing to pay price by the consumer and the actual paying price of the consumer. The maximum willing to pay price is the price that the consumer gives to the commodity. When the consumer values the good most, he will be ready to pay the highest willing to pay price and vice versa. Thus, the willingness to pay, the consumer surplus, and the demand curve are closely related with each other.

The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest willing to pay price of the consumer and the actual price that the consumer pays.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 7, Problem 1QR

To determine

How willingness to pay, consumer surplus, and demand curve are related.

Expert Solution & Answer

Explanation of Solution

The consumer surplus is the difference between the maximum willing to pay price by the consumer and the actual paying price of the consumer. The maximum willing to pay price is the price that the consumer gives to the commodity. When the consumer values the good most, he will be ready to pay the highest willing to pay price and vice versa. Thus, the willingness to pay, the consumer surplus, and the demand curve are closely related with each other.

The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest willing to pay price of the consumer and the actual price that the consumer pays.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 7, Problem 1QR

To determine

How willingness to pay, consumer surplus, and demand curve are related.

Expert Solution & Answer

Explanation of Solution

The consumer surplus is the difference between the maximum willing to pay price by the consumer and the actual paying price of the consumer. The maximum willing to pay price is the price that the consumer gives to the commodity. When the consumer values the good most, he will be ready to pay the highest willing to pay price and vice versa. Thus, the willingness to pay, the consumer surplus, and the demand curve are closely related with each other.

The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest willing to pay price of the consumer and the actual price that the consumer pays.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 1QR

To determine

How willingness to pay, consumer surplus, and demand curve are related.

Expert Solution & Answer

Explanation of Solution

The consumer surplus is the difference between the maximum willing to pay price by the consumer and the actual paying price of the consumer. The maximum willing to pay price is the price that the consumer gives to the commodity. When the consumer values the good most, he will be ready to pay the highest willing to pay price and vice versa. Thus, the willingness to pay, the consumer surplus, and the demand curve are closely related with each other.

The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest willing to pay price of the consumer and the actual price that the consumer pays.

Answer 6

Chapter 7, Problem 1QR

To determine

How willingness to pay, consumer surplus, and demand curve are related.

Expert Solution & Answer

Explanation of Solution

The consumer surplus is the difference between the maximum willing to pay price by the consumer and the actual paying price of the consumer. The maximum willing to pay price is the price that the consumer gives to the commodity. When the consumer values the good most, he will be ready to pay the highest willing to pay price and vice versa. Thus, the willingness to pay, the consumer surplus, and the demand curve are closely related with each other.

The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.

Economics Concept Introduction

Concept introduction:

Consumer surplus: It is the difference between the highest willing to pay price of the consumer and the actual price that the consumer pays.

Answer 7

Chapter 7, Problem 1QR

To determine

How willingness to pay, consumer surplus, and demand curve are related.

Answer 8

Expert Solution & Answer

Explanation of Solution

The consumer surplus is the difference between the maximum willing to pay price by the consumer and the actual paying price of the consumer. The maximum willing to pay price is the price that the consumer gives to the commodity. When the consumer values the good most, he will be ready to pay the highest willing to pay price and vice versa. Thus, the willingness to pay, the consumer surplus, and the demand curve are closely related with each other.

The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.