Question

The demand curve for peanuts is downward-sloping. At a price of $2 / pound, the quantity...

The demand curve for peanuts is downward-sloping. At a price of $2 / pound, the quantity demanded of peanuts is 100 pounds. If the price of peanuts rises to $4 / pound, consumer surplus will:

a. Decrease by exactly $200.

b. Decrease by less than $200.

c.Decrease by exactly $100.

d. Decrease by more than $200.

Homework Answers

Answer #1

Option B is correct

consumer surplus is the difference between the willingness to pay by consumer and the price consumer actually pays. it is the area of the region below the demand function and above the price line in case of a linear demand curve. When the price level is increased, consumer surplus decreases. there is a reduction in the quantity demanded and an increase in the price due to which consumer surplus does not fall entirely by $200 but by a value less than it.

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