How Much Consumer Surplus Does Your Roommate Enjoy From An Ipod?

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Chapter 3 Supply and Demand End-of-Chapter Questions November 25, 2012 Facts and Tools 1. When the price of a good increases the quantity demanded ____. When the price of a good decreases the quantity demanded ____. GHOST ANSWER: When the price of a good increases the quantity demanded falls. quantity demanded rises. 2. When will people search harder for substitutes for oil: When the price of oil is high or when the price of oil is low? GHOST ANSWER: When the price of oil is high, people will search harder for substitutes. 3. Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a machine that could store and replay that much music. How much consumer surplus does your roommate enjoy from the iPod? GHOST ANSWER: She enjoys $300 of consumer surplus from the iPod. (Willingness to pay minus price you actually paid equals consumer surplus.) 4. What are three things that you'll buy less of once you graduate from college and get a good job? What kinds of goods are these called? GHOST ANSWER: There are many possible answers, including ramen noodles, macaroni and cheese, clothes from discount stores, low-quality used cars, and bus tickets. These are called  inferior goods. 5.…show more content…
If the price of glass dramatically increases, what are we likely to see a lot less of: Glass windows or glass bottles? Why? GHOST ANSWER: We'll probably see a big decline in glass bottles, but only a small decline in glass windows. Plastic is a good substitute for glass in the manufacturing of bottles, but not as good a substitute for windows. Thus, we would probably see a greater percentage decline in glass bottles than in windows. 10. Let's think about the demand for plasma TVs. (a). If the price for a 500 plasma TV is $2,010, and Newhart would be willing to pay $3,000, what is Newhart's consumer surplus? GHOST ANSWER: Individual consumer surplus: $990 (b). Consider the gure below for the total demand for plasma TVs. At $2,010 per TV, 1,200

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