To determine how much benefit Kathy receives from each trip home, we need to analyze her annual demand curve for plane tickets and understand the concept of consumer surplus or benefit from the trips.
Step 1: Understand the Demand Curve
- The demand curve shows the relationship between the price of plane tickets and the quantity of trips Kathy is willing to take.
- At higher prices, Kathy takes fewer trips.
- At lower prices, she takes more trips.
Step 2: Define "Benefit" from Each Trip
- The benefit Kathy receives from a trip is the maximum amount she is willing to pay for that trip minus the actual price she pays.
- This is also known as the consumer surplus for that trip.
- If we look at the demand curve, the height of the curve at a given quantity represents the maximum willingness to pay for that trip.
Step 3: Calculate Benefit for Each Trip
- For the first trip , find the price on the demand curve where quantity = 1. This price represents Kathy’s maximum willingness to pay for the first trip.
- The actual price she pays is given (or assumed).
- The difference between the willingness to pay and the actual price is the benefit from the first trip.
- Repeat this for the second trip, third trip, etc.
Example (Hypothetical)
Trip Number| Willingness to Pay (from demand curve)| Actual Price| Benefit
(WTP - Price)
---|---|---|---
1| $300| $200| $100
2| $250| $200| $50
3| $180| $200| $0 (no benefit, price > WTP)
Step 4: Total Benefit from Trips
- The total benefit Kathy receives from all trips is the sum of the individual benefits for each trip.
- This can be visualized as the area under the demand curve above the price line up to the quantity she consumes.
What You Need to Do Next:
- Look at the actual demand curve graph provided.
- Identify the willingness to pay for each trip (height of the demand curve at each quantity).
- Use the actual ticket price Kathy pays.
- Calculate the benefit for each trip as described.
If you provide the demand curve data or the actual prices, I can help you calculate the exact benefits!
