Question

Construct a graph of rational consumer A's demand curve for 'Normal' Good W from the following...

Construct a graph of rational consumer A's demand curve for 'Normal' Good W from the following information - Total resources = 1000 units; Price of Good W is initially = 100 units; Price of Good W is then changed to = 200 units. What does the area under the demand curve represent to the consumer. What would happen to this demand curve if consumer A's information changed?

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Answer #1

The area under the demand curve represent the consumer surplus.

when the consumer's information changed about the good W, then the demand curve shift left or right . indicating that consumer'A would either demanded more of good A or less of good A at all price level based on information he gets. for examples, if he get the information that price of good W would decrease in future, then the demand curve would shift to the left , indicating the decrease in quantity demand at all price in present and vice-versa.

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