Sarah and David both have linear demand curves for lemonade.Sarah's demand curve for lemonade intersects David's demand curve at a price of 50 cents per glass.Sarah's demand curve is more inelastic than David's.A change in the price of lemonade from 50 cents to 25 cents per glass will
A) decrease Sarah's consumer surplus more than David's.
B) decrease David's consumer surplus more than Sarah's.
C) increase Sarah's consumer surplus more than David's.
D) increase David's consumer surplus more than Sarah's.

Question

Quizplus · Accepted Answer

Since Sarah's demand is more inelastic, her consumer surplus will increase less than David's when the price decreases, as David's demand is more elastic and he will benefit more from the price reduction.

Sarah and David Both Have Linear Demand Curves for Lemonade