Problem
Suppose that it costs 12 pence a mile in direct operating costs to run a car.
Let X be miles per week and p be measured in pence, and an individual's demand curve for car transport be given by
p = 400 - 4Q
(a) How many miles per week will be driven?
(b) How much consumer's surplus will be gained from operating the car?
(c) Would the individual be willing to pay a fixed cost, over and above variable costs, of £60 per week to operate the car?
(d) Suppose the direct cost of operating a car rose to £2 per mile because of an increase in the price of petrol. How would your answers to questions (a), (b) and (c) change?
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.