Define consumer surplus. Using a graph, explain the change in consumer surplus that would result from a decrease in the price of a gasoline.
Refer to Figure 6.8.
What will be an ideal response?
Consumer surplus is the net benefit a consumer receives from participating in the market for a good. Graphically, it is represented by the area below the demand curve and above the price of the good. When the price of gasoline is P1, consumer surplus is represented by the area of the triangle labeled a in the graph. When the price of gasoline falls to P2, consumer surplus is equal to the area of triangle abc.
You might also like to view...
The labor force participation rate is percentage of the ________ who are in the labor force
A) people under age 65 B) working-age population C) people over age 16 D) population
Which of the following policy actions by the Fed would cause the money supply to increase?
a. An open market sale of government securities. b. An increase in required reserve ratios. c. A decrease in the discount rate. d. All of these.
If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total world output? a. It will increase
b. It will decrease. c. It will be unchanged in both countries. d. It will rise in one country, and fall in the other, but the total is unchanged.
The "crowding out" effect states that government spending pushes up interest rates and reduces private investment spending
a. True b. False Indicate whether the statement is true or false