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

Value of first bottle $7

Value of second bottle $5

Value of third bottle $3

Value of fourth bottle $1

a. From this information, derive Bert’s demand schedule. Graph his demand curve for bottled water.

b. If the price of a bottle of water is $4, how many bottles does Bert buy? How much consumer surplus does Bert get from his purchases? Show Bert’s consumer surplus in your graph.

c. If the price falls to $2, how does quantity demanded change? How does Bert’s consumer surplus change?

b. When the price of a bottle of water was $ 4, Bert bought 2 bottles of water. Consumer surplus of him is shown as area A in Fig. He valued his first bottle of water at 7 dollars, but only pay 4 dollars for it, so the consumer surplus is $ 3. He valued his second bottle of water at 5 dollars, but only pay 4 dollars for it, so the consumer surplus of $ 1. Therefore, the total consumer surplus of $ 3 + $ 1 = $ 4, is in the area of A

c. When the price of a water bottle dropped from $ 4 to $ 2, Bert bought three bottles of water, increasing it. His consumer surplus includes both areas A and B in the figure, an increase in the number of areas B. He gets a $ 5 consumer surplus from the first bottle ($ 7 minus $ 2 ), $ 3 from the second bottle (minus $ 5 The $ 2 price) and $ 1 from the third bottle ($ 3 minus $ 2), with a total consumer surplus of $ 9. Therefore, consumer surplus increased $ 5 (which is the size of area B) when the price of a bottle of water dropped from $ 4 to $ 2.