Question

The demand function for a commodity is:Qd = 80/PIf the market equilibrium price drops from $8 to $4 per unit, what is the change in consumer surplus. Put your answer correct to 3 decimal places.

Answer 1

Give the demand function for a commodity

`Qd=(80)/(p)`

where

Qd= Quantity demand

p= price

the pirce drops from $8 to $4 per unit

then

`Qd1=(80)/(8)=10`
`Qd2=(80)/(4)=20`

the consumer surplus is give by

`Qs=(1)/(2)Qd*(p)`

then

`Qs1=(1)/(2)(10)(8)`
`Qs1=45`
`Qs2=(1)/(2)(20)*4`
`Qs2=40`

the change is given by

`change=Qs1-Qs2`
`change=45-40`
`change=5`

the change in the consumer surplus is $5

rounded 3 decimal places $5. 000