Question

For each scenario, decide whether it creates a producer or a consumer surplus. Then, calculate the ensuing surplus. Alice is willing to spend $30 on a pair of jeans, and has a coupon for $10 off which she found online. She selects and purchases a pair of jeans which cost $35 pre-discount. Alice experiences a Alice's surplus: $ Jeff finds some steaks for $16 for which he would have been willing to pay $20. The butcher notices the meat is near the expiration date and gives him an extra 75% off. Jeff experiences a Jeff's surplus: $ Nicole has a hockey puck from the 2018 Winter Olympic Games and puts it up for sale on eBay. She will only sell the puck if the winning bid is greater than or equal to $500. After bidding closes, the last bid stands at $501. Nicole experiences a Nicole's surplus: $

Determine where producer is experiencing a producer surplus or consumer surplus, along with the amount of the surplus.

Answer 1

Alice, Consumer surplus = 30 - (35 -10) = 30 - 25 = 5

Jeff, Consumer surplus = 20 - (16 - 0.75 * 16) = 20 - 4 = 16

Nicole, Producer surplus = 501 - 500 = 1