1. Ch. 7 Problems and Applications Q4

It is a hot day, and Tim is thirsty. Here is the value he places on a bottle of water:

Value of first bottle:	$9
Value of second bottle:	$7
Value of third bottle:	$4
Value of fourth bottle:	$1

From this information, complete the following table by deriving Tim's demand schedule.

Price	Quantity Demanded
More than $9
$7.01 to $9
$4.01 to $7
$1.01 to $4
$1 or fewer

Based on Tim's willingness to pay, plot Tim's demand curve as a step function on the following graph using blue points (circle symbol) beginning at a quantity of 0 bottles of water.

Tim's DemandPrice = $6Quantity PurchasedConsumer Surplus012345109876543210Price of WaterQuantity of Water

Suppose the price of a bottle of water is $6.

Use the black line (plus symbol) to draw a price line at $6. Next use the grey point (star symbol) to indicate how many bottles of water Tim will buy at that price. Finally, use the green point (triangle symbol) to shade the area that represents Tim's consumer surplus from his purchases.

In this case, Tim receives

in consumer surplus from his water purchase.

If the price falls to $3, Tim now buys

bottles of water. This his consumer surplus to

.