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Sarah and David both have linear demand curves for lemonade. Sarah's demand curve for lemonade intersects...

Sarah and David both have linear demand curves for lemonade. Sarah's demand curve for lemonade intersects David's demand curve at a price of 50 cents per glass. Sarah's demand curve is more inelastic than David's. A change in the price of lemonade from 50 cents to 25 cents per glass will

A. increase David's consumer surplus more than Sarah's.

B. increase Sarah's consumer surplus more than David's.

C. decrease Sarah's consumer surplus more than David's.

D. decrease David's consumer surplus more than Sarah's.

i know the answer is A, but why?

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Answer #1

Ans) the correct option is A. increase David's consumer surplus more than Sarah's.

Because Davids’ demand is less inelastic than Sarah meaning a small percentage decrease in price will lead to a larger percenatage increase in quantity demanded. When price decreases to 25 cents David’s quantity demanded for lemonade increases which means his consumer suplus increases. Sarah demand is more inelastic so the decrease in price will not lead to a larger percentage increase in quantity so her consumer surplus does not increase much

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