Joe's demand for spring water can be represented as p = 10 - Q (where p is measured in $/gallon and Q is measured in gallons).He recently discovered a spring where water can be obtained free of charge.His consumer surplus from this water is
A) $0.
B) $50.
C) $100.
D) unknown based upon the information provided.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. Here, Joe is willing to pay according to the demand curve p = 10 - Q but pays $0 because the water is free. The consumer surplus can be calculated as the area of the triangle under the demand curve above the price of $0, which is 1/2 * base * height = 1/2 * 10 * 10 = $50.

Joe's Demand for Spring Water Can Be Represented as P