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Figure: The Market for Hybrid Cars
-(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. What area represents consumer surplus if there is a binding price floor at P₁?

Question

Use the following to answer questions:
Figure: The Market for Hybrid Cars

-(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. What area represents consumer surplus if there is a binding price floor at P₁?

Quizplus · Accepted Answer

A binding price floor set at P1 means the price is above the equilibrium price, reducing the quantity demanded. Consumer surplus is the area below the demand curve and above the price level up to the quantity sold, which is represented by area 'a'.

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