Question

Hugo decides to buy his Christmas gifts on Black Friday. To simplify his life, he is giving his 10 closest friends scarves for Christmas and everyone else Christmas cards. Hugo is willing to spend $200 on the 10 scarves. When he arrives at Macy’s at 5:00 A.M. on Black Friday, he discovers that scarves are on sale for $12 each. Hugo buys 10 scarves and uses the remaining $80 to buy himself a some clothes. How much consumer surplus did Hugo receive from the tenth scarf he purchased?

Answer 1

Answer:

$8

Explanation:

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the product.

Consumer surplus = willingness to pay - price

The consumer surplus of the 10th scarf :

Willingness to pay for the 10th scarf - price of the scarf

Willingness to pay for the 10th scarf =  $200 / 10 = $20

Consumer surplus = $20 - $12 = $8

I hope my answer helps you

Answer 2

Answer:

$80

Explanation:

Consumer surplus can be defined as the difference between what a consumer is willing to pay for a particular product and the amount he actually paid. The amount he actually paid is usually less than what he is willing to pay.

Consumer surplus= willing price - actual price

Hugo is willing to pay $200 for 10 scarfs

That is $200/10

=$20/scarf

Actual price paid is $12/scarf

That is, $12×10

=$120

Consumer surplus per scarf=$20-$12

=$8

This is to say that Hugo has a surplus of $8 per scarf

Total surplus on 10 scarfs can be calculated

Total Consumer surplus=$200-$120

=$80

Or

Multiplying each surplus by 10 scarfs

Each surplus=$8

Then,

Total surplus=$8×10

=$80