Florian has inverse demand function for bread is P(b) = 30−2b. He currently consumes 10 bread...

Florian has inverse demand function for bread is P(b) = 30−2b. He currently consumes 10 bread at a price of $10. (Provide graph if it helps your solution.)

(a) How much money would he be willing to pay to have this amount rather than no bread at all? What is his level of net consumer’ surplus?

(b) If the price of bread increases from $10 to $14. What is his change in consumer’s surplus?

Expert Solution

Consumer surplus is nothing but the difference between what the consumer is willing to pay and what he ends up paying. So with an increase in price from $10 to $14, the consumer surplus falls by $36.

Please refer to the handwritten solution.

Rahul Sunny answered 2 years ago

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