Sam has quasilinear preferences and his demand function for x is . The price of x is initially $15 per unit and increases to $24 per unit. Sam's change in consumer's surplus is closest to
A) -168.
B) -76.
C) -27.
D)75
E) Sam won't consume x at either of the prices.

Question

Sam has quasilinear preferences and his demand function for x is  . The price of x is initially $15 per unit and increases to $24 per unit. Sam's change in consumer's surplus is closest to
A) -168. 
B) -76. 
C) -27. 
D)75 
E) Sam won't consume x at either of the prices.

Quizplus · Accepted Answer

We first need to calculate Sam's initial consumer's surplus at a price of $15 per unit:

CS = e^(11/15) - 11/15 * e^(11/15) = $9.3645

Then, we can calculate his new consumer's surplus at a price of $24 per unit:

CS' = e^(11/24) - 11/24 * e^(11/24) = $3.6732

Therefore, his change in consumer's surplus is:

ΔCS = CS' - CS = -$5.6913

Rounding this to the nearest integer gives us -76, which is closest to answer choice B.

Sam Has Quasilinear Preferences and His Demand Function for X