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Mairoon Mairoon
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6 years ago
Ann and Bill each spend $30 per month on cigarettes when the price is $1 per pack. Draw a graph to illustrate that the consumer with the less elastic demand will suffer the greater loss of consumer surplus when the price of cigarettes increases. Explain and label the figure.
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Microeconomics

Microeconomics


Edition: 6th
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#1
6 years ago
See the above figure. The curve labeled LE is the less elastic demand curve, and the curve labeled ME is the more elastic demand curve. When price increases from $1 to pn, the person with demand curve ME suffers a loss of a + c + e. The person with demand curve LE suffers a loss of a + b + c + d + e. Thus, the person with the less elastic demand suffers the greater loss of consumer surplus.
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