1. What is consumer surplus? How consumer surplus can be measured using a demand curve?
2. Regis is hungry for a snack. Here is the value he places on a cupcake
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Regis
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Willingness to pay
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Value of First cupcake
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$5
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Value of Second cupcake
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$4
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Value of Third cupcake
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$3
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Value of Fourth cupcake
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$2
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a. From the above schedule, derive the Regis demand schedule diagrammatically.
b. If the price of cupcake is $3.50, how many cupcakes Regis would buy? What would be his consumer surplus?
c. If the price falls to $2.50, how does the quantity demanded changes? What would be his consumer surplus then? Explain with the help of diagram.