5.17. The accompanying figure illustrates the change in consumer surplus, given by Area ABEC, when the price

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5.17. The accompanying figure illustrates the change in consumer surplus, given by Area ABEC, when the price decreases from P1 to P2. This area can be divided into the rectangle ABDC and the triangle BDE. Briefly describe what each area represents, separately, keeping in mind the fact that consumer surplus is a measure of how well off consumers are (therefore the change in consumer surplus represents how much better off consumers are).

(Hint: Note that a price decrease also induces an increase in the quantity consumed.)

P1 P2 q1 q2 A B Demand C D E

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Microeconomics

ISBN: 9780470563588

4th Edition

Authors: David Besanko, Ronald Braeutigam

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