Question

1st attempt Jung is willing to pay $85 for a new jacket that sells for $70. Eddie is willing to pay $65 for that same acket. What is the total consumer surplus for Jung and Eddie? Choose one:
A. $10
B. $15
C. $220
D. $150
E. $30

Answer 1

Answer:

Option (B) is correct.

Explanation:

Consumer surplus refers to the benefit or surplus that a consumer get from purchasing the product. It is the difference between consumer's willingness to pay and the selling price of the product.

If the outcome of this difference is positive then there will be a consumer surplus and if the outcome of this difference is negative then there will be no consumer surplus.

Total consumer surplus:

= consumer surplus for Jung + consumer surplus for Eddie

= ($85 - $70) + $0

= $15

Eddie has zero consumer surplus because selling price is higher than his willingness price for the jacket.