Question

Kat is willing to pay $900 for 25 bottles of grape wine. The market price of 15 boties of grape wine is $390. Because of an increasein the price of grapes, the price of grape wine increases to $450 for 15 bottles. Kat's consumer surplus has decreased A consumer has the following demand schedule for a grape wine bottle. Each bottle's price is the same as the marginal benefit by because of an increase in the price of grapes (Enter your response as a whole number.) Quantity Demandoa Price 300 240 210 Suppose the market price of a grape wine bottle is $220 per unit. Calculate the consumer surplus and the consumer's total benefit Consumer surplus is S. and the consumer's total benefit is S□ Enter your responses as whole numbers.

Answer 1

Answer:

Answer explained below

Explanation:

decrease in consumer surplus = 0.5(initial number of bottles - final number)*(final price-initial price) + (final price-initial price)*(final number)

where initial number of bottles = 25

final number of bottles = 15

initial price = $390

final price = $390

substituting these values, we have

- decrease in consumer surplus = 0.5(25-15)(450-390) + (450-390)15 = 1200

Consumer surplus decreases by 1200

- Consumers will buy the good as long as marginal benefit is greater than or equal price.

Thus quantity demanded will be 2 from the table

Consumer surplus = 240- market price = 240 -220= 20

Consumers total benefit = 220*quantity demanded = 220*2= 440