Figure 4-1

Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.If the market price is $1.50, what is the consumer surplus on the first burrito?
A)$0.50
B)$1.00
C)$1.50
D)$7.50

Question

Figure 4-1
  
Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.If the market price is $1.50, what is the consumer surplus on the first burrito?
A)$0.50 
B)$1.00 
C)$1.50 
D)$7.50

Quizplus · Accepted Answer

To find the consumer surplus for the first burrito, we need to locate the price of $1.50 on the vertical axis and follow it horizontally to the demand curve. Then, we draw a line straight down to the horizontal axis to find the quantity demanded at that price, which is 5 burritos. The consumer surplus is then the difference between the maximum amount that Arnold is willing to pay (which is $2.50) and the actual price ($1.50), multiplied by the quantity purchased (1). So, the consumer surplus on the first burrito is ($2.50-$1.50) x 1 = $1.00.

Figure 4-1 Figure 4-1 Shows Arnold's Demand Curve for Burritos