Question 2

2. Individual demand and consumer surplus Consider the market for hyperbaric chambers. The market price of each hyperbaric chamber is $195,000, and each consumer demands no more than one hyperbaric chamber. Suppose that Kenji is the only consumer in the hyperbaric chamber market. Their willingness to pay for a hyperbaric chamber is $390,000. Based on Kenji's willingness to pay, the following graph shows his demand curve for hyperbaric chambers. Shade the area representing Kenji's consumer surplus using the green rectangle (triangle symbols). (?) 520 455 Kenji's Consumer Surplus Kenji's Demand 325 PRICE (Thousands of dollars) 80 Market Price 105 130 85 0 2 3 QUANTITY (Hyperbaric chambers) Now, suppose another buyer, Lucia, enters the market for hyperbaric chambers, and her willingness to pay is $325,000.Based on Lucia's and Kenji's respective willingness to pay, plot the market demand curve on the following graph using the biue points (circle symbol). Next, shade Kenji's consumer surplus using the green rectangle (triangle symbols), and shade Lucia's consumer surplus using the purple rectangle (diamond symbols). Mote: Plot your points as a step function in the order in which you would like them connected. Line segments will connect the points automatically. 520 Qo 455 Demand Curve 300 325 Kenji's Consumer Surplus . - PRICE (Thousands of dollars) - Market Price Lucia's Consumer Surplus 130 85 o o 1 2 3 4 5 QUANTITY (Hyperbaric chambers) Suppose Paolo is willing to pay a total of $130,000 for a hyperbaric chamber. True or False: Keeping his maximum willingness to pay for a hyperbaric chamber in mind, Paclo will not buy the hyperbaric chamber because it would be worth less to him than its market price of $195,000. O True ) False Suppose the market price of a VR headset increases to $110. On the following graph, use the rectangles once again to shade the areas representing producer surplus for each person who is willing to sell a VR headset at the new market price: blue (circle symbols) for Jake, green (triangle symbols) for Latasha, purple (diamond symbols) for Nick, tan (dash symbols) for Rosa, and orange (square symbols) for Tim. (Note: If a person will not sell a VR headset at the new market price, indicate this by leaving their rectangle in its original position on the palette.) (?) 160 140 Tim Jake 120 Market Price 100 Rosa Latasha PRICE (Dollars per VR headset) 60 Nick Nick 40 Latasha Rosa Jake 2 3 5 Tim QUANTITY (VR headsets) Based on the information in the second graph, when the market price of a VR headset increases to $110, the number of sellers willing to sell a VR headset to , and total producer surplus to $5. Producer surplus for a group of sellers The following graph plots a supply curve {orange line) for several sellers in the market for VR headsets in College Station, a university town in Texas. Each seller has a single VR headset for sale. The market price of VR headsets is given by the horizontal black line at $70. Each rectangle on the graph corresponds to a particular seller in this market: blue {circle symbols) for Jake, green (triangle symbols) for Latasha, purple {diamond symbaols) for Nick, tan (dash symbols) for Rosa, and orange (square symbols) for Tim. (Note: The name labels are to the right of the corresponding segment on the supply curve.) Use the rectangles to shade the areas representing producer surplus for each person who is willing to sell a VR headset at a market price of $70. (Note: If a person will not self 3 VR headset at the market price, indicate this by leaving their rectangle in its original position on the palette.) @ 140 Tim Jaks 120 100 Latasha X Market Price Nick i PRICE (Dollars per YR headset) 8 40 Rosa 20 o o 1 2 3 4 5 8 7 3 Tim QUANTITY (VR headsets) Based on the information on the precading graph, you can tell that will sell VR headsets at the given market price, and total producer surplus in this market will be