The market price of a good is $10 and 40 units of the good sell at this price. Its demand curve intersects the vertical axis at a price of $12 and has a constant slope. What is the approximate value of consumer surplus in this market?

Question

Quizplus · Accepted Answer

Consumer surplus is the area of the triangle formed by the demand curve, the price line, and the vertical axis. The height of the triangle is $2 ($12 - $10), and the base is 40 units. The area is 0.5 * base * height = 0.5 * 40 * 2 = $40.

The Market Price of a Good Is $10 and 40