-Refer to Figure 6.4.If the price is $1,500,then consumer surplus is equal to

Question

Quizplus · Accepted Answer

Consumer surplus is the area below the demand curve and above the price line. In this case, the demand curve is a straight line with a slope of -1. The price line is a horizontal line at $1,500. The consumer surplus is the area of the triangle formed by the demand curve, the price line, and the vertical axis. The base of the triangle is $1,000 (the difference between the equilibrium quantity and the quantity demanded at a price of $1,500) and the height of the triangle is $175 (the difference between the equilibrium price and the price of $1,500). Therefore, the consumer surplus is $175,000.