Price is $50 and quantity demanded is 2,000 units at point A on a linear demand curve. The linear supply curve intersects the demand curve at point B, which is at a price of $30 and 3,000 units. Which of the following statements is true?

Question

Quizplus · Accepted Answer

The consumer surplus is the area between the demand curve and the price level. Moving from point A to point B reduces the price from $50 to $30 and increases the quantity from 2,000 to 3,000, increasing consumer surplus. The increase in consumer surplus is calculated as the area of the triangle with a base of 1,000 units (3,000 - 2,000) and a height of $20 ($50 - $30), which is 0.5 * 1,000 * 20 = $10,000.

Price Is $50 and Quantity Demanded Is 2,000 Units at Point