Question

Urgently needed

An individual consumes only one good, the good Y. It has the demand curve y = 15 - (p / 3). The

price of the good there increases from $ 15 to $ 24.

a) Calculate the change in net consumer surplus due to this price increase.

b) Calculate the change in gross consumer surplus due to this price increase.

Answer 1

Gross consumer surplus is the area below the demand curve till the price point whereas net consumer surplus is the gross surplus after substracting the cost. So, using this, we have

Demad curve is p=45-3y

At $15, y=15-15/3=10

At $24, y=15-24/3=7

a> The net consumer surplus was

The net consumer surplus is

Thus, the change is 150-136.5=13.5

b>

The gross consumer surplus was

The gross consumer surplus is

Thus, the change is 300-241.5 = 58.5