Sarah and David Both Have Linear Demand Curves for Lemonade

question 62

Multiple Choice

Sarah and David both have linear demand curves for lemonade.Sarah's demand curve for lemonade intersects David's demand curve at a price of 50 cents per glass.Sarah's demand curve is more inelastic than David's.A change in the price of lemonade from 50 cents to 25 cents per glass will

• A) decrease Sarah's consumer surplus more than David's.
• B) decrease David's consumer surplus more than Sarah's.
• C) increase Sarah's consumer surplus more than David's.
• D) increase David's consumer surplus more than Sarah's.

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Definitions:

Book Value

The value of an asset as recorded on the balance sheet, calculated by deducting the accumulated depreciation or amortization from the asset's original cost.

Equity Method

An accounting technique used to record investments in associate companies, reflecting the investor's share of the earnings.

Common Stock

Represents ownership shares in a corporation, giving holders voting rights and a share in the company's profits through dividends.