2. (5 points) For each of three potential buyers of oranges, the table displays
ID: 1142498 • Letter: 2
Question
2. (5 points) For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges. rst Orange Second Orange Third Orange 2.00 1.50 lison 0.75 0.60 0. 1.50 ob harisse S0.25 (a) At a price of $0.90 what is the quantity demanded? (b) At a price of 0.90 what is the total consumer surplus? Please show your calculations. (e) Assume that at a price of $90 total quantity supplied is 3. Is there equilibrium at a price of $0.90 3. (5 points PriceExplanation / Answer
2.
(a) The quantity demanded ar $0.90 is 4
(Allison and Bob's willingness to pay for first and second oranges exceed $0.90 so Allison and Bob will buy 2 oranges each. Thus, total quantity demanded is 4)
(b) Consumer Surplus is the difference between willingness to pay and price paid by consumer. As we know, 4 oranges are bought, so total consumer surplus is = Consumer surplus of allison + consumer surplus of bob
Consumer surplus of allison = (2.00 - 0.90) + (1.50 - 0.90) = 1.10 + 0.60 = 1.70
Consumer surplus of bob = (1.50 - 0.90) + (1.00 - 0.90) = 0.60 + 0.10 = 0.70
So, total consumer surplus = 1.70 + 0.70 = $2.40
(c) No, there is no equilibrium at a price of $0.90. As quantity demanded is 4 which exceeds quantity supplied.
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