Questions: a. If the price for a 60 -inch LED TV is 800, and Newhart would be willing to pay 3,000, what is Newhart's consumer surplus? Newhart's consumer surplus: 2200 b. Consider the following figure for the total demand for LED TVs. At 800 per TV, 12,000 TVs were demanded. What would be the total consumer surplus (CS)? Calculate the total, and identify it on the diagram with the points A, B, and Total consumer surplus: 13200000 c. Where is Newhart in the figure? Use the line segment N to show his position.

Solution Steps

Newhart's consumer surplus is the difference between what he is willing to pay and the actual price he pays.

• Willing to pay: $3,000
• Actual price: $800
• Consumer surplus = $3,000 - $800 = $2,200

The total consumer surplus is the area of the triangle formed by the demand curve and the price line.

• Price (P) = $800
• Quantity (Q) = 1,200 TVs
• The highest price someone is willing to pay (from the graph) = $5,600
• Total consumer surplus = 0.5 * (Base * Height) = 0.5 * (1,200 * ($5,600 - $800)) = 0.5 * (1,200 * $4,800) = 0.5 * 5,760,000 = $2,880,000

Newhart is willing to pay $3,000 for a TV. On the graph, find the point where the price is $3,000 and draw a line segment N to show his position.

Final Answer