Question

Rizal is hungry for burgers. here is the value he places on a burger

value of first burger RM5

value of second burger RM4

value of third burger RM3

value of fourth burger RM2

1 for the schedule derive Rizal’s demand schedule. Graph his demand curve for burgers.

2 If the price of a burger is RM3.5, how many burgers does Rizal buy? How much consumer surplus does Rizal get from his purchase? Show his consumer surplus in your graph.

3 If the price falls to RM2.50 how does quantity demanded change? How does Rizal’s consumer surplus change? Show these changes in your graph.

Answer 1

The following diagram shows the demand curve for Rizal where D is the demand curve which shows the different quantity demanded at different prices.

If the price of the burger is 3.5,which is shown as point D, then Rizal ends up buying C quantity of burgers.

Consumer surplus is the welfare that people gain from purchasing and consuming goods and is the difference between the total amount that the consumers are willing to pay for a good and the the total amount (market price)that they actually pay.It is the area under the demand curve and abobe the market price which is offered.So, here it is denoted by the area ABK.

Now, if the price falls to 2.50 as denoted by E,the quantity demanded changes from OC to OG and the consumer surplus increases and here it is denoted by the area EABF which states that consumer has now more surplus.