4Q- 35 Venkat Reddy is very fond of mango fruits. If mangoes cost 10 rupees each, Reddy spends his budget on fruits that he values more highly than mangoes. However, at 4 rupees each Reddy buys 20 mangoes for devouring over a one-week period. The total consumer surplus in rupees for Venkat would be closest to: 4Q- A. 13. 4Q- B. 26. 4Q- C. 60. 4Q- D. 120. ------------------------------------------- mine is C consumer surplus=20*(10-4)/2=60
why not 120?
C is what they are looking for, although the question probably makes some assumptions that I’m not sure are correct. What about at prices above $10?
why divided by 2?
Area of a triangle.
Draw a graph. A vertical line for price, a horizontal one for quantity, a downward sloaping line intersecting the vertical ax at 10. That means At a price of 10 rupees, Venkat buys other fruits, and no mangoes. At any price above 10 rupees, Venkat buys no mangoes. At 4 on the vertical ax draw a line paralel with the horizontal ax. At the point of intersection with the downward sloaping line draw a perpendicular on the horizontal ax. Than point would be 20 on the horizontal line. This means that Venkat buys 20 mangoes @ a 4 rupees price each. The consumer surplus is the triangle made by: the vertical ax (price) between 4 and 10, the horizontal line that you draw starting @4 on the vertical line (spans from 0 to 20 on the horizontal ax), and the downward sloaping line. What’s the area of that triangle? (10-4)*(20-0)/2=60.
Dreary Wrote: ------------------------------------------------------- > C is what they are looking for, although the > question probably makes some assumptions that I’m > not sure are correct. What about at prices above > $10? ---------------------------------------------------------- above 10? between how much and 4? we need a price, if not, it is unlimited.