Question

in may 1991, car and driver described a jaguar that sold for 980,000 dollars. suppose that at that price only 60 have been sold. if it is estimated that 375 could have been sold if the price had been 530,000 dollars. assuming that the demand curve is a straight line, and that 530,000 dollars and 375 are the equilibrium price and quantity, find the consumer surplus at the equilibrium price.

Answer 1

The consumer surplus at the equilibrium price is $187,500,000.

Step-by-step explanation:

The consumer surplus at the equilibrium price can be calculated by finding the area between the demand curve and the price. In this case, the equilibrium price is $530,000 and the quantity demanded is 375. To find the consumer surplus, we need to find the area between the demand curve and the price line. This can be done by subtracting the price from the willingness to pay for each unit and summing up the differences.

The formula for consumer surplus is:

Consumer Surplus = (Willingness to Pay - Price) * Quantity

In this case, the willingness to pay is $980,000 and the price is $530,000. So the consumer surplus can be calculated as:

Consumer Surplus = ($980,000 - $530,000) * 375 = $187,500,000

Therefore, the consumer surplus at the equilibrium price is $187,500,000.