Question

5. John the plumber has the following weekly demand for repairs by his business: Q = 2,000 – 10(P) Q = quantity of repairs demanded by customers per week. P = average price per repair. John chooses the price to charge to his customers (cause). The result (effect) will be the total number of repairs his customers want per week.

A. Draw the demand curve faced by John the plumber. Numerically label its two end points. B. Create the table of numbers: P Q TR MR P = average price per repair. You may skip numbers for price changes by $10 at a time. TR = Total Revenue = PQ MR = Marginal Revenue = (change in TR)/(change in Q) Draw the MR curve on the diagram, as well/ C. The MC (Marginal Cost) to John per repair is $20. What price (P) will be charged per repair, and how many repairs (Q) per week? Show it on your diagram with solved numbers. D. Label the Consumer Surplus on your diagram. Define Consumer Surplus, as well.

Answer 1

A) Demand curve faced by John ,the plumber----

Price($)	quantity demanded( units)
100	1000
110	900
120	800
130	700

See the demand graph------

B) Table------

Price $	Q	TR($) p*Q	MR	MC
100	1000	100000	-	20
110	900	99000	20	20
120	800	96000	30	20
130	700	91000	50	20
140	600	84000	70	20

C) MR curve along with demand curve and MC-----

The equilibrium point will occur----

where M R=MC

Have. Look at the graph in part (A), we find that -----

both are equal(20) at units of 900

# price to be charged per repair=$110 (see above graph)

# Repairs per week= 900

D) Consumers surplus(CS)---- $40500

CS is the difference between what the consumers are willing to pay and what they actually pay

formula=1/2* Q* (wTP--P)

1/2(900)(200-110)=$40500

The shaded area pink depicts the consumers surplus.