1) Using the graph of a demand curve, explain why marginal revenue is lss than price, when the demand in not perfect elastic. 2} Explain the difference between consumer surplus, compensating and equivalent variation in words. Now try again without looking at the book. And one more time! A) True or False questions. You need to justify your answers for this part 1) There is a positive consumer's surplus when the total amount the consumer pays for something is less than the amount she would be willing to pay rather than do without it altogether. 2) If there is a price increase for a good that Marilyn consumes, her compensating variation is the change in her income that allows her to purchase her new optimal bundle at the original prices. 3) If the demand curve is a linear function of price, then the price elasticity of demand is the same at all prices. 4) If the demand function is d = Smlp, where m is income and p is price, then the absolute value of the price elasticity of demand decreases as price increases