Question

Identify whether each of the following statements best illustrates the concept of consumer surplus, producer surplus, or neither. Statement Consumer Surplus Producer Surplus Neither I sold a used laptop for $108, even though I was willing to go as low as $100 in order to sell it. A local store was having a sale on watches, so I bought a watch for my brother. Even though I was willing to pay up to $37 for a jersey sweater, I bought a jersey sweater for only $30.
Consumer Surplus
Producer Surplus
Economic Surplus

Answer 1

Answer:

I sold a used laptop for $108, even though I was willing to go as low as $100 in order to sell it. = Producer Surplus

A local store was having a sale on watches, so I bought a watch for my brother. = Economic Surplus or "Neither"

Even though I was willing to pay up to $37 for a jersey sweater, I bought a jersey sweater for only $30. = Consumer Surplus

Explanation:

"Economic Surplus" refers to the sum of the gain that both consumer and producer have when it comes to selling or buying the product. Both the buyer and seller in the situation above have gains. The buyer was able to have a gain in buying the watch on sale, while the seller considered the profit as a gain rather than as a loss.

"Producer Surplus" refers to the difference between the lowest price that the seller is willing to sell its product and the market price of the good. The seller in the situation above is willing to sell as low as $100, but the market price for the laptop is actually higher.

"Consumer Surplus" refers to the difference between the highest price that a buyer is willing to buy a product and the market price of the good. The buyer is willing to pay $37 for the jersey sweater, but the jersey sweater costs a lot lower.

So, this explains the answers above.