Megan loves donuts. The table shown reflects the value Megan places on each donut she eats:
a. Use this information to construct Megan's demand curve for donuts.
b. If the price of doughnuts is $0.20, how many donuts will Megan buy?
c. Show Megan's consumer surplus on your graph. How much consumer surplus would she have at a price of $0.20?
d. If the price of doughnuts rose to $0.40, how many donuts would she purchase now? What would happen to Megan's consumer surplus? Show this change on your graph.
Definitions:
Annual Family Income
The total amount of money earned by all members of a family within one year.
Income Distribution
The way in which total income is shared amongst the members of a society, often analyzed to understand the extent of economic inequality.
Before-Tax Income
The total income earned by an individual or corporation before taxes have been deducted.
Welfare Reforms
Changes or amendments to a country’s welfare policy aimed at improving the effectiveness and efficiency of its social security and aid programs.
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