Question

Suppose the market demand for a good is described by the equation P = 80 - 2Q. If a change in market supply results in price decreasing from P0 = $60 to P1 = $50, then the resulting change in consumer surplus is:

Answer 1

Calculate Q (consumer surplus) when P = 60


`60=80-2Q` ⇒ Subtract 60 from both sides

`60-60=80-2Q-60`

`0=20-2Q` ⇒ Add 2Q to both sides

`0+2Q = 20-2Q+2Q`

`2Q=20` ⇒ Divide both sides by 2

`(2Q)/(2) = (20)/(2)`

`Q=10`

--------------------------------------------------------------------------------------------------------------

Calculate Q when P = 50


`50=80-2Q`

`50-50=80-2Q-50`

`image`

`2Q=30`

`Q=15`

--------------------------------------------------------------------------------------------------------------

As the value of P decreasing, the value of Q increases from 10 to 15