On Thursday nights, a local restaurant has a pasta special. Ari likes the restaurant's pasta, and his willingness to pay for each serving is shown in the accompanying table.
Quantity of pasta (Servings) Willingness to pay for pasta (per serving)
A. If the price of a serving of pasta is $4, how many servings will Ari buy? How much consumer surplus does he receive?
b. The following week, Ari is back at the restaurant again, but now the price of a serving of pasta is $6. By how much does his consumer surplus decrease compared to the previous week?
c. One week later, he goes to the restaurant again. He discovers that the restaurant is offering an "all you can eat" special for $25. How much pasta will Ari eat, and how much consumer surplus does he receive now?
d. Suppose you own the restaurant and Ari is a "typical" customer. What is the highest price you can charge for the
"all you can eat" special and still attract customers?
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A. At $4, Ari buys 4 servings. The consumer surplus is the area formed by the triangle between the demand curve and the equilibrium price. Draw a demand curve if it helps you. We can calculate it algebraically as the difference between the highest price ...