Suppose an individual demand curve is given by P = 100 - 5Q, where P is the price of cigarettes ($/pack) and Q is the quantity she consumes (packs/week).Assuming her income per week is $1,000 and the current price of cigarettes is $5 per pack, by how much will her consumer surplus decline if the price of cigarettes increased to $10/pack?
A)$92.5
B)$810
C)$950
D)$25

Question

Quizplus · Accepted Answer

The initial consumer surplus is the area of the triangle with a base from Q=0 to Q=19 (where P=5) and height from P=5 to P=100, which is (1/2)*(19)*(95) = $902.5. When the price increases to $10, the new quantity is Q=18, and the new consumer surplus is (1/2)*(18)*(90) = $810. The decline in consumer surplus is $902.5 - $810 = $92.5.

Suppose an Individual Demand Curve Is Given by P =