Chapter 49, Problem 1CYU

a)

To determine

Market demand schedule for the product

Explanation of Solution

A consumer buys pepper if the price is less than or equal to the consumer’s willingness to pay for the good and no consumer is willing to consume more than 4 at any price, therefore the table would consider the following market demand schedule:

Quantity of peppers	Price of pepper	Quantity of peppers demanded by C	Quantity of peppers demanded by J
1	$0.90	1	0
2	0.80	1	1
3	0.70	2	1
4	0.60	2	2
5	0.50	3	2
6	0.40	3	3
8	0.30	4	4
8	0.20	4	4
8	0.10	4	4
8	0.00	4	4

Economics Concept Introduction

Introduction: The market demand schedule represents the tabular information about the quantity and price of a good that consumers are ready to buy at different prices.

b)

To determine

Total consumer surplus at price $0.40

Explanation of Solution

Quantity of peppers	C’s willingness to pay	C’ssurplus at price 0.40	J’s willingness to pay	J’s surplus at price 0.40
1	$0.90	$0.50 (0.90-0.40)	$0.80	$0.40 (0.80-0.40)
2	0.70	0.30	0.60	0.20
3	0.50	0.10	0.40	0.00
4	0.30	0.00	0.30	-
Surplus: $0.90 $0.60

When the price is 0.40, C’s consumer surplus from the first pepper is $0.50, $0.30 from the second, and $0.10 from the third and after that, he does not buy any pepper. Therefore, the total surplus of C is

$0.90.

At $0.40, J’s consumer surplus from the first pepper is $0.40, from the second $0.20, and after that J does not buy more. Therefore, the total surplus of J is $0.60.

Here, the total consumer surplus at a price of $0.40 would be:

  $\begin{array}{c}\text{= C’s surplus+J’s surplus}\hfill \\ \begin{array}{l}=\$0.90+\$0.60\\ =\$\mathrm{1.50.}\end{array}\hfill \end{array}$

Economics Concept Introduction

Introduction: Any excess in production, earnings, or the supply of goods is called surplus which is more than the need.