Table 4-13

-Refer to Table 4-13. 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?
A) $300 thousand
B) $450 thousand
C) $900 thousand
D) $1,500 thousand

Question

Table 4-13
 
-Refer to Table 4-13. 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?
A) $300 thousand 
B) $450 thousand 
C) $900 thousand 
D) $1,500 thousand

Quizplus · Accepted Answer

Consumer surplus is calculated as the area of the triangle above the equilibrium price and below the demand curve. If the equilibrium price is $20 and the equilibrium quantity is 30 thousand units, and assuming a linear demand curve, the consumer surplus can be calculated as 0.5 * base * height. The base is the equilibrium quantity (30 thousand units), and the height is the difference between the maximum price consumers are willing to pay and the equilibrium price. Assuming the maximum price is higher than $20, the consumer surplus is $450 thousand.

Table 4-13 -Refer to Table 4-13. the Equations Above Describe the Demand