Question

If MWTP=30-3Q represents a consumer's marginal willingness to pay function for a good, then (a) What...

If MWTP=30-3Q represents a consumer's marginal willingness to pay function for a good, then

(a) What is the total amount of the good the consumer wants to buy at the price of $12/unit?

(b) What is the total willingness to pay for 4 units (i.e. total amount bought is 4) of this good?

Please explain (b) in details with a diagram

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Homework Answers

Answer #1

a) At a proce of $12, total amount a consumer wants to buy is 12 = 30 - 3Q

Q = 6

b) Total willingness to pay for 4 units is area of portion A + B + C + D + E + F + G + H + I + J in diagram below whose sum is 30

You can see in diagram below that at a price of 27, consumer is willing to buy 1 unit and 2 units at a price of 24 and so on...

Willingness to pay for 1st unit = 30 - 3 * 1 = 27

Willingness to pay for 2nd unit = 30 - 3 * 2 = 24

Willingness to pay for 3rd unit = 30 - 3 * 3 = 21

Willingness to pay for 4th unit = 30 - 3 * 4 = 18

Total willingness to pay for 4 units = 27 + 24 + 21 + 18 = 90

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