Question

Identify whether each of the following statements best illustrates the concept of consumer surplus, producer surplus, or neither.
Producer Surplus Consumer Surplus Neither Statement
a. Even though I was willing to pay up to $40 for a jersey sweater,
b. I bought a jersey sweater for only $31 I sold a used laptop for $137, even though
c. I was willing to go as low as $130 in order to sell it A local store was having a sale on watches, so I bought a watch for my brother.

Answer 1

Answer:

a. Even though I was willing to pay up to $40 for a jersey sweater, I bought a jersey sweater for only $31.

Consumer Surplus;

= 40 - 31

= $9

When the amount that a consumer is willing to pay for something is more than the amount they actually pay, the difference is the Consumer surplus.

b. I sold a used laptop for $137, even though I was willing to go as low as $130 in order to sell it.

Producer Surplus

= 137 - 130

= $7

When the amount that a producer is willing to sell something for is less than the amount they actually sell it for, the difference is the Producer surplus.

c. I was willing to go as low as $130 in order to sell it A local store was having a sale on watches, so I bought a watch for my brother. Neither.