Assignment
Review the following material, then answer the following questions that follow:
Definition: Consumer surplus is defined as the difference between the consumers' willingness to pay for a commodity and the actual price paid by them, or the equilibrium price.
1. The following information describes the value Lori Landlord places on having her five apartment houses repainted. She values the repainting of each apartment house at a different amount depending on how badly it needs repainting.
Value of new paint on 1st apt house $5,000
Value of new paint on 2nd apt house $4,000
Value of new paint on 3rd apt house $3,000
Value of new paint on 4th apt house $2,000
Value of new paint on 5th apt house $1,000
PLEASE NOTE: These amounts are Lori's willingness to pay... NOT how much money she has.
a. Plot Lori Landlord's willingness to pay. (Note don't worry about turning in the plotted graph, just do it on paper.)
b. If the price to repaint her apartments is $5,000 each, how many will she repaint? What is the value of her consumer surplus?
c. Suppose the price to repaint her apartments falls to $2,000 each. How many apartments will Lori choose to have repainted? What is the value of her consumer surplus?
d. What happened to Ms. Landlord's consumer surplus when the price of having her apartments repainted fell? Why?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.