The above figure shows the market demand curve for telecommunication while drivi

Question

The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). Determine the change in consumer surplus as a result of a specific tax that increases the price by $0.15.

Answer provided by instructor:

Originally, the consumer surplus was equal to $924.50. After the tax, the consumer surplus is equal to $800. The change is consumer surplus is -$124.50.

I submitted this question before and was told that the consumer surplus after taxes was equal to $850. If someone could explain the $50.00 difference, I would really appreciate it!

Explanation / Answer

Initial Consumer Surplus = 1/2 *( 2.50 -.35) * 860 = $ 924.50

We need to calculate the equation of demand curve to estimate the new consumer surplus :

P = a - b Q

b is the slope of the production function given by 2.50 / 1000 = .0025

P = a - .0025 Q

Putting P = .35 and Q = 860 , we get a = 2.5

P = 2.5 -0.0025 Q is the demand equation

Putting P = .35 + .15 = .50 , we get Q = 800

New consumer Surplus = 1/2 * 800 * (2.50 - .50) = $800

Change in consumer Surplus = $124.50

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