Figure 9.5
-Refer to Figure 9.5. If the government establishes a price floor of $2.50, consumer surplus will

Question

Quizplus · Accepted Answer

The price floor of $2.50 is above the equilibrium price of $2. Consumer surplus is the area above the price and below the demand curve. With the price floor, the new quantity demanded is 40, which is less than the previous quantity of 60. The new consumer surplus is the triangle above the price floor, below the demand curve, and to the left of the new quantity demanded. This new consumer surplus is equal to ($3 - $2.50) x (40 - 20) / 2 = $20. The previous consumer surplus was ($3 - $2) x (60 - 20) / 2 = $70. Therefore, consumer surplus falls by $70 - $20 = $50.

Figure 9.5 -Refer to Figure 9.5. If the Government Establishes a Price