Question

It is a hot day, and Bert is thirsty. Here is the value he places on each bottle of water: Value of first bottle $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 a bottle of water is $4, how many bottles 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 falls to $2, how does quantity demanded change? How does Bert’s consumer surplus change? Show these changes in your graph.

Answer 1

Answer:

a. Please check the attached image for the diagram

b. He would buy 2 bottles

$4

Please check the attached image for the diagram

c. he demands 3 bottles. his demand increases by 1 bottle

his consumer surplus changes to $3. It reduces by $1

Please check the attached image for the diagram

Explanation:

The demand schedule is a table that shows the relationship between price and quantity demanded of a consumer. It can be seen that the higher the price, the lower the quantity demanded. This is in line with the law of demand.

The demand curve is a curve that shows the relationship between price and quantity demanded. The demand curve is negatively sloped because the higher the price, the lower the quantity demanded. This is in line with the law of demand.

According to the law of demand, the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.

Consumer surplus = willingness to pay – price of the good

the price of the good is $4 and when price is $7, he would purchase a bottle and when it is $5, he would buy a second bottle.

Thus, he would buy 2 bottles when the price is $4