Table 3.5
-Refer to Table 3.5.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 3.5 
-Refer to Table 3.5.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

To calculate consumer surplus, we need to find the area under the demand curve and above the equilibrium price. This triangle can be split into two smaller triangles: one with a base of 10,000 (from a price of $10 to $20) and a height of 40 (from a quantity of 20 to 30), and another with a base of 10,000 (from a price of $20 to $30) and a height of 10 (from a quantity of 30 to 40). The total area of these two triangles is ($10 x 40)/2 + ($10 x 10)/2 = $450 thousand. Therefore, the value of consumer surplus is $450 thousand.

Table 3.5 -Refer to Table 3.5.The Equations Above Describe the Demand and the Demand