Consumer Surplus

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Southern New Hampshire University *

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201

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Economics

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Feb 20, 2024

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docx

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Uploaded by kbeasley0816

Poornima buys an iPhone for $240 and gets a consumer surplus of $160. Her willingness to pay for an iPhone is [$400 v . Explanation: Close Explanati Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. Therefore, you can compute Poornima's willingness to pay in the following way: Consumer Surplus = Willingness to Pay — Price $160 = Willingness to Pay — $240 Willingness to Pay = $400 If she had bought the iPhone on sale for $180, her consumer surplus would have been |$220 i\/ Explanation: Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it: Consumer Surplus = $400 — $180 = $220 If the price of the iPhone had been $500, her consumer surplus would have been [$0 v Explanation: Close Explanation ~ If the price of the iPhone had been $500, Poornima would not have purchased one, because that price is greater than her willingness to pay. Therefore, she would have received no consumer surplus in this case. See Section: Willingness to Pay.

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