If a tax has caused the market-clearing quantity to fall to Q 2 , what is consumer surplus?

All right. Let's try it. If a tax has caused the market clearing quantity to fall to q2, what is consumer surplus? Alright, so in this case, we are at Q2, right? We're not at equilibrium, which would have been Q1 and P star there, right? So we're at q2 and what is consumer surplus? So consumer surplus is gonna be everything above the price, but below the demand curve, right? Where this is our demand curve, our downward demand, upward supply. So what is the price? And in this case, the price to consumers, right? Because we're talking about consumer surplus, what is the price to consumers? And that's gonna be this right here, right? The PB. The price that the consumers pay is PB And we're gonna have everything above that is consumer surplus and below the demand curve. And that's just gonna be this area of A, right? So that triangle A, that is going to be our consumer surplus and that's it. There's no other consumer surplus. Our answer is A. The area of A is the consumer surplus. Let's go on to the next one.

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1. Introduction to Macroeconomics1h 57m
2. Introductory Economic Models59m
3. Supply and Demand3h 43m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Price Floors3h 40m
6. Introduction to Taxes1h 25m
7. Externalities1h 3m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. Introducing Economic Concepts49m
11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)1h 37m
12. Unemployment and Inflation1h 15m
13. Productivity and Economic Growth1h 17m
14. The Financial System1h 37m
15. Income and Consumption52m
16. Deriving the Aggregate Expenditures Model1h 22m
17. Aggregate Demand and Aggregate Supply Analysis1h 18m
18. The Monetary System1h 1m
19. Monetary Policy1h 32m
20. Fiscal Policy1h 0m
21. Revisiting Inflation, Unemployment, and Policy46m
22. Balance of Payments30m
23. Exchange Rates1h 16m
24. Macroeconomic Schools of Thought40m
25. Dynamic AD/AS Model35m
26. Special Topics11m

6. Introduction to Taxes

Effects of Taxes on a Market

Macroeconomics

6. Introduction to Taxes

Effects of Taxes on a Market

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Multiple Choice

If a tax has caused the market-clearing quantity to fall to Q₂, what is consumer surplus?

The area of (A)

The area of (A), (B), and (C)

The area of (A), (B), (C), (D), and (E)

The area of (A), (B), (C), (D), (E), and (F)

The area of (C) and (E)

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Verified step by step guidance

Identify the initial consumer surplus before the tax. Consumer surplus is the area between the demand curve and the price level, up to the quantity traded. Initially, this is the area above the price level P* and below the demand curve, up to Q1.

Determine the new consumer surplus after the tax. The tax causes the market-clearing quantity to fall to Q2. The new consumer surplus is the area above the new price level (which is now at PB due to the tax) and below the demand curve, up to Q2.

Examine the graph to identify the areas that represent the new consumer surplus. The area of consumer surplus after the tax is the triangle formed by the price level PB, the demand curve, and the quantity Q2.

In the graph, the area of consumer surplus after the tax is represented by the area labeled (A). This is because it is the area above the price level PB and below the demand curve, up to Q2.

Conclude that the consumer surplus after the tax is the area of (A), as it is the only area that fits the criteria of being above the price level PB and below the demand curve, up to the new quantity Q2.