Suppose Eddie's demand curve for text messages is T = 150 - 500P_t,where T stands for the number of text messages and P_t represents the price of text messages.What is Eddie's consumer surplus if P_t = $0.05 per message? A) $5.00 B) $7.81 C) $15.63 D) $31.25

Question

Quizplus · Accepted Answer

To find consumer surplus, calculate the area of the triangle formed by the demand curve and the price line. The maximum willingness to pay (where T = 0) is when P_t = 0.30. At P_t = 0.05, T = 125. The consumer surplus is 0.5 * (0.30 - 0.05) * 125 = $15.63.

Suppose Eddie's Demand Curve for Text Messages Is T =