Suppose that a consumer's demand curve for a good can be expressed as P = 50 - 4Q^d. Suppose that the market is initially in equilibrium at a price of $10. Now suppose that the price rises to $14. What is the change in consumer surplus? A) An increase of 38. B) A decrease of 38. C) A decrease of 42. D) A decrease of 36.

Question

Quizplus · Accepted Answer

To find the change in consumer surplus, we need to calculate the consumer surplus at both prices and then subtract them. At a price of $10, the quantity demanded can be found by solving the demand equation for QS1:
$10 = 50 - 4QS1
4QS1 = 40
QS1 = 10
The consumer surplus at this price is:
CS1 = 0.5*(10-0)*(50-10) = $200
At a price of $14, the quantity demanded is:
$14 = 50 - 4QS2
4QS2 = 36
QS2 = 9
The consumer surplus at this price is:
CS2 = 0.5*(9-0)*(50-14) = $162
Therefore, the change in consumer surplus is:
CS2 - CS1 = $162 - $200 = -$38, which is a decrease of $38. Therefore, the correct answer is B.

Suppose That a Consumer's Demand Curve for a Good Can