Question

for the demand curve shown, find the total amount of consumer surplus that results in the gasoline market if gasoline sells for $2 per gallon. demand for gasoline instructions: enter your response as a whole number. consumer surplus: $ per year.

Explanation:

Step1: Identify the formula for consumer - surplus

Consumer surplus is the area of the triangle above the price line and below the demand curve. The formula for the area of a triangle is $A=\frac{1}{2}bh$, where $b$ is the base and $h$ is the height.

Step2: Determine the base and height of the triangle

The price of gasoline is $P = 2$ per gallon. The demand - curve intersects the price - axis at $P = 10$ and the quantity axis at some point. At $P = 2$, the quantity demanded from the graph is $Q=80000$ gallons (since the quantity is in 1,000s of gallons). The height of the triangle $h$ is the difference between the maximum price consumers are willing to pay ($10$) and the actual price they pay ($2$), so $h=10 - 2=8$. The base $b$ of the triangle is the quantity demanded at the price of $2$, which is $b = 80$ (in 1,000s of gallons).

Step3: Calculate the consumer surplus

Using the area formula $A=\frac{1}{2}bh$, we substitute $b = 80$ (in 1,000s of gallons) and $h = 8$. So, $A=\frac{1}{2}\times80\times8$.
\[

$$\begin{align*} A&=\frac{1}{2}\times80\times8\\ &=40\times8\\ &=320 \end{align*}$$

\]
Since the quantity is in 1,000s of gallons, the consumer surplus is $320\times1000=\$320000$.

Answer:

320000