A company sells a specialized product. The demand for this product is such that the maximum price any consumer would be willing to pay is $8,000. The company sets the price at $5,440 and sells 320 units at this price. What is the total consumer surplus in this market?

Evaluating a Pricing Strategy's Impact on Consumer Surplus

Consider a market where a single price is charged for a product. On a standard price-quantity graph that includes the demand curve, the total consumer surplus is represented by the rectangular area whose corners are the origin (0,0), the point on the vertical (price) axis representing the market price, the point on the horizontal (quantity) axis representing the quantity sold, and the point representing the combination of market price and quantity sold.

Explaining the Graphical Representation of Consumer Surplus

Consider a market represented on a standard price-quantity graph. The demand curve is a straight line that intersects the price axis at $100. A company sets a price of $60 and sells 50 units. This scenario creates two distinct geometric shapes on the graph:

• Area A: A triangle bounded by the demand curve, the price axis, and the horizontal price line at $60.
• Area B: A rectangle bounded by the price axis, the quantity axis, the price line at $60, and the vertical quantity line at 50 units.

Match each area to the economic concept it represents.

Analyzing the Impact of a Price Reduction on Consumer Surplus

On a standard price-quantity graph, the demand for a specific brand of headphones is represented by a straight line. The highest price any consumer is willing to pay is $150. The company sets the price at $90, and at this price, 400 units are sold. The total consumer surplus, represented by the triangular area on the graph, is $____. (Please enter a numerical value without commas or symbols.)

A new tech gadget is launched to the market. Its price and sales volume change over three consecutive years, while the overall consumer demand for it remains the same. On a standard price-quantity graph, this means the demand curve does not shift. Arrange the following scenarios from the year with the smallest total consumer surplus to the year with the largest total consumer surplus.

Correcting a Miscalculation of Consumer Surplus

A firm sells high-end laptops in a market represented by a standard price-quantity graph. The demand curve is a straight line that intersects the vertical price axis at $3,500. The firm sets a single market price of $2,000, and sells 500 laptops at this price. Which of the following statements correctly identifies the area on the graph that represents the total consumer surplus?