Sir Plus has a demand function for mead that is given by the equation D(p)= 100 - p.If the price of mead is $85, how much is Sir Plus's net consumer's surplus?
A)15
B)112.50
C)56.25
D)225
E)7,650

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. The demand function D(p) = 100 - p gives us the maximum price consumers are willing to pay for each quantity. At a price of $85, the quantity demanded is D(85) = 100 - 85 = 15. The area under the demand curve up to this quantity, but above the price paid, represents the consumer surplus. This area forms a triangle with a base of 15 (from 0 to 15 units) and a height of 15 (from the price paid, $85, up to the maximum price of $100). The area of a triangle is 1/2 * base * height, so the consumer surplus is 1/2 * 15 * 15 = 112.50.

Sir Plus Has a Demand Function for Mead That Is