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

Jasmine Grewal · Accepted Answer

Final Answer : B, Explanation :  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 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

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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) 15B) 112.50C) 56.25D) 225E) 7,650

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Learning Objectives

Learning Objectives

Related questions

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