Suppose that Lucy’s demand for private concerts (performed by Schroeder) is given by the following equation Suppose that the cost of concerts is $2. What is Lucy’s Consumer Surplus? a. 15 b. 10 c. 12.50 d. 20

d. 20

Missing Information:

Explanation:

TO sovle for the consumer surplus we need to get the equilibrium price and quantity.

If P = 2 then:

Qd = 15 - (5 / 2) x 2 = 15 - 5 = 10

Now we need to knwo how much is the price that makes Lucy do not consume:

We solve for Qd = 0

0 = 15 - (5/2) x P

p = 15 / (5/2) = 6

Now we calculate the area of the consumer surplus which is the area of the demand curve above the equilibrium price.

10 x (6-2) / 2 = 10 x 4 / 2 = 20

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