Table 4-5

-Refer to Table 4-5. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of consumer surplus?

Question

Table 4-5
 
-Refer to Table 4-5. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of consumer surplus?

Quizplus · Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. In this case, at the equilibrium price of $20, consumers are willing to pay up to $40 for 30 thousand units of Aunt Maud's lotion, as shown by the demand curve. Therefore, consumer surplus is:
($40 - $20) x 30,000 / 2 = $450,000

Table 4-5 -Refer to Table 4-5. the Equations Above Describe the Demand