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Answered Same Day Oct 28, 2021

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Alomita answered on Oct 30 2021

165 Votes

Q1.
Ans (a)
The demand curve is defined as visual display of the relationship between of the price of a product and the quantity demanded. A deeper examination of the demand curve reveals that it is a measure of consumers willingness to pay for a product. MWTP is the maximum price an individual would be willing to pay for the next unit of the good or service.
Now according to the question , 70,000 visits are made by city A per year at $20 travel cost to a nea
y beach park and 50,000 visits are made by city B per year at $40 travel cost to the beach park which is further away from city A. We also assume that their taste are identical for the park in terms of their marginal willingness to pay if they face the same travel cost. Clearly , we can see that the travel cost are not the same for both cities and hence, their marginal willingness to pay will not be same and so as the demand curve will also not be identical. Following is the demand curve or the MWTP curve of the city A.
Ans (b)
Consumer surplus is the difference between the price that the consumers pay and the price that they are willing to pay.
Figure 2: consumer surplus of city A
Figure 3 : consumer surplus of city B
Consumer surplus of city A =...

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