Question

It is hot a day and Bert is thirsty ,here is the value he places on a bottle of water
Value of first 7$
Value of second bottle 5$
Value of third bottle 3$
Value of fourth bottle 1$
a)from this information derive Bert,s demand schedule graph his demand curve for bottled water.
b)if the price of bottle of water is $4 how many bottle does Bert buy?how much consumer surplus does Bert get from his purchases ? Show Bert,s consumer surplus in your graph.
c)if the price fall to$2 how does quantity demanded change how does Bert's consumer surplus change show these changes in your graph

Answer 1

a)from this information derive Bert,s demand schedule graph his demand curve for bottled water.

b)if the price of bottle of water is $4 how many bottle does Bert buy?how much consumer surplus does Bert get from his purchases ? Show Bert,s consumer surplus in your graph.

If the price is $4, Bert will consume 2.5 bottles. The amount of the consumer surplus is:

$CS = \dfrac{1}{2}(9 - 4)(2.5) = \$6.25$

The triangular area is the consumer surplus.

c)if the price fall to$2 how does quantity demanded change how does Bert's consumer surplus change show these changes in your graph

If the price reduces to $2, the quantity demanded increases to 3.5 bottles.

The consumer surplus increases to:

$CS = \dfrac{1}{2}(9 - 2)(3.5) = \$12.25$