Thanks to a new federal program that will provide 50% matching funds Fun City has decided to build a new municipal water park with pools, water slides, and so forth. You have been hired to conduct a study to determine if the water park can pass the test. a. A nearby and very similar city currently has a water park similar to the one Fun City is considering. The nearby city currently charges $10 for admission and, on a typical day, attracts 4,000 persons. Last year, it charged $15, but only attracted 3,000 paying customers. b. Assuming that the demand curve for water parks is linear, demonstrate how this information might be used to estimate the net benefits received by those using the Fun City water park, if Fun City charges an admission price of $12.50. [ NOTE : You need not compute the actual amount; just use a graph and clearly indicate the area that represents the net benefit amount.] c. By how much, and in what direction, would the net benefits received by those using the water park change if Fun City charges a $15.00 admission price, rather than $12.50? [ NOTE : This time compute the actual dollar value.]
Thanks to a new federal program that will provide 50% matching funds Fun City has decided to build a new municipal water park with pools, water slides, and so forth. You have been hired to conduct a study to determine if the water park can pass the test.
a. A nearby and very similar city currently has a water park similar to the one
Fun City is considering. The nearby city currently charges $10 for admission and, on a typical day, attracts 4,000 persons. Last year, it charged $15, but only attracted 3,000 paying customers.
b. Assuming that the demand curve for water parks is linear, demonstrate how this information might be used to estimate the net benefits received by those using the Fun City water park, if Fun City charges an admission price of $12.50. [ NOTE : You need not compute the actual amount; just use a graph and clearly indicate the area that represents the net benefit amount.]
c. By how much, and in what direction, would the net benefits received by those using the water park change if Fun City charges a $15.00 admission price, rather than $12.50? [ NOTE : This time compute the actual dollar value.]
The consumer surplus is the difference between the consumer’s willingness to pay and what he actually pays, this represents net benefit of consumer as well. There are two types of surplus that occur: Producer surplus and Consumer surplus.
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