The demand curve for product X is given by QXd = 520 - 4PX The demand curve for
ID: 1194375 • Letter: T
Question
The demand curve for product X is given by QXd = 520 - 4PX
The demand curve for product X is given by QXd = 520 - 4PX.
a. Find the inverse demand curve.
PX = - QXd
Instructions: Round your answer to the nearest penny (2 decimal places).
b. How much consumer surplus do consumers receive when Px = $50?
$
c. How much consumer surplus do consumers receive when Px = $30?
$
d. In general, what happens to the level of consumer surplus as the price of a good falls?
The level of consumer surplus as the price of a good falls.
Explanation / Answer
a. QXd = 520 - 4PX
4Px = 520 – Qxd
Or
Px = 130 – 0.25Qxd
b. Consumer surplus at P = 50
At Q = 0, 0=520-4P, 4P =50 or P = 130
At P=50, Q = 520-4*50 = 520-200 =320
CS = 0.5*(130-50)*320 =12800
c. Consumer surplus at P = 30
At P=30, Q = 520-4*30 = 520-120 =400
CS = 0.5*(130-50)*400 =16000
d. As price falls consumer stands to gain more surplus.
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