Question

Anna is willing to spend $500 for the bike she wants. if she finds a bike store where the price of the bike she wants is only $400, she will receive ______ in consumer surplus from this transaction.

Answer 1

The answer is $100. The consumer surplus is $100 because that is the difference between what Anna has set as her ceiling for the purchase of the bicycle, $500, and then subtracted by the amount that she actually does pay, $400, that difference is what is referred to as consumer surplus. What the consumer is mentally committed to paying minus what the consumer actually pays.