Suppose the demand for raspberry frozen yogurt can be represented by the equation Q_D = 5 - 2P,and the supply is given by the equation Q_S = 3P.Which of the following is the best estimate of the consumer surplus in this market? A)$2 B)$1.25 C)$2.25 D)$3.75

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. In this case, the demand curve is Q_D = 5 - 2P, which means that consumers are willing to pay a maximum of $2.50 for a unit of raspberry frozen yogurt. The supply curve is Q_S = 3P, which means that producers are willing to sell a unit of raspberry frozen yogurt for $1.25. Therefore, the consumer surplus is $2.50 - $1.25 = $1.25.

Suppose the Demand for Raspberry Frozen Yogurt Can Be Represented