Melissa buys an iPhone for $240 and gets consumer surplus of $160.
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Melissa buys an iPhone for $240 and gets consumer surplus of $160. a. What is her willingness to pay? b. If she had bought the iPhone on sale for $180, what would her consumer surplus have been? |
Here is a tip:
The consumer surplus is the benefit gained by an individual on the purchase of a good.
Explanation
The consumer surplus is the difference between the actual price of a good and the maximum willingness of a consumer to pay. By rearranging, the maximum willingness of a consumer to pay is calculated as follows:
\begin{aligned} \text{Maximum willingness to pay} &= \text{consumer surplus + price of commodity} \\ &=\$ \text{160+} \$ \text{240} \\ &=\$\text{400}\end{aligned}
Maximum willingness to pay =consumer surplus + price of commodity=$160+$240=$400
Verified Answer
$400
B
Here is a tip:
The consumer surplus is the benefit gained by an individual on the purchase of a commodity.
Explanation
The consumer surplus is the difference between the actual price of a commodity and the price that the consumer is willing to pay for the commodity.
\begin{aligned} \text{Consumer surplus }&=\text{\,Willingness to pay }-\text{\,price of commodity} \\ &=\$ \text{400-} \$ \text{180}\\ &=\$\text{220}\end{aligned}
Consumer surplus =Willingness to pay −price of commodity=$400-$180=$220
Verified Answer
$220
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