Question

On a shopping​ trip, melanie decided to buy a light blue coat made from woven fabric. a tag on the coat stated that the price was​ $79.95. when she brought the coat to the​ store's sales​ clerk, melanie was told that the coat was on​ sale, and she would pay 20 percent less than the price on the tag. after the discount was​ applied, melanie paid​ $63.96, $15.99 less than the original price. the value of​ melanie's consumer surplus from this purchase is
a. ​$79.95 since this is the price she is willing to pay.
b. ​$63.96 since this is the actual price she pays.
c. at least​ $15.99 since this is the difference between the price melanie is willing to pay for the coat and the actual price she​ pays, but she could have be willing to pay more than​ $79.95 for the coat.
d. exactly​ $15.99 since this is the difference between the maximum price melanie is willing to pay for the coat and the actual price she pays.

Answer 1

The answer is D, exactly​ $15.99 since this is the difference between the maximum price Melanie is willing to pay for the coat and the actual price she pays. The answer is D because consumer surplus is defined as the different between what a consumer is willing to spend on a good or service versus what they actually spend on the good or service. In this case, Melanie was willing to pay the $79.95 for the item but ended up only paying $63.96 so the difference was $15.99.