-The consumer surplus when 1 million units of the product in this market are consumed is:

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. In this case, the consumer surplus is the area below the demand curve and above the price line. The demand curve is a downward-sloping line, which means that as the price of a good increases, the quantity demanded decreases. The price line is a horizontal line, which means that the price of the good is constant. The area below the demand curve and above the price line is a triangle, which has an area of 1/2 * base * height. The base of the triangle is the quantity demanded, which is 1 million units. The height of the triangle is the difference between the price consumers are willing to pay and the price they actually pay. In this case, the price consumers are willing to pay is $10 per unit, and the price they actually pay is $6 per unit. Therefore, the height of the triangle is $4 per unit. The area of the triangle is therefore 1/2 * 1 million units * $4 per unit = $2 million.

-The Consumer Surplus When 1 Million Units of the Product