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Consider the following demand schedule for umbrellas at a local store:
a. Draw the demand curve for umbrellas. Be sure to label the axes.
b. Suppose the price of umbrellas is $14. Indicate the area of market consumer surplus in your graph. Also indicate the area that represents the total amount that consumers spend on umbrellas.
c. Next, assume that Rebecca is willing to pay a maximum of $18 for an umbrella. What is Rebecca's consumer surplus if she purchases an umbrella? Show her consumer surplus on your graph.
d. Another consumer, Andy, is willing to pay a maximum of $10 for an umbrella. What is his consumer surplus in this market?
e. If the demand schedule above represents demand on a normal summer day, what would you expect to happen to market consumer surplus if the forecast is for a heavy rainfall? Assume that the store does not raise its price. Draw a graph to support your answer.
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