Question

Below is the market for smartphones. Shade the total consumer surplus (CS) on the graph by correctly placing the CS shaded area. What is the total consumer surplus (CS) in the market for smartphones?

1) $100 million
2) $200 million
3) $300 million
4) $400 million

Answer 1

The total consumer surplus in the market for smartphones can be found by shading the area above the market price and below the demand curve. The equilibrium price is $80 and the equilibrium quantity is 28 million. To calculate the total consumer surplus, we need to find the area on the graph labeled F.

Step-by-step explanation:

The total consumer surplus in the market for smartphones can be found by shading the area above the market price and below the demand curve, as shown in Figure 3. Consumer surplus represents the benefit that consumers receive by paying a price lower than what they were willing to pay for a product. In this case, the equilibrium price is $80 and the equilibrium quantity is 28 million. To calculate the total consumer surplus, we need to find the area labeled F on the graph.

From the graph, we can see that point J represents the quantity demanded if the price was $90, which is 20 million tablets. Consumers who were willing to pay $90 for a tablet but were able to purchase it at the equilibrium price of $80 will receive a benefit equal to the consumer surplus. To find the area of consumer surplus, we need to calculate the difference between what consumers would have been willing to pay and what they actually paid.

Using the information provided, we can estimate the total consumer surplus as the sum of consumer surpluses from each tablet sold. The area labeled F represents the total consumer surplus in the market for smartphones. By calculating the area of F, we can determine the value of the total consumer surplus in the market for smartphones.