Question

In the market for a particular pair of shoes, jena is willing to pay $75 for a pair while jane is willing to pay $85 for a pair. The actual price that each has to pay for a pair of shoes is $65. What is the combined amount of consumer surplus of jena and jane?

Answer 1

Answer: Consumer surplus is $30.

Explanation:

Consumer surplus is the amount of benefit gained by the consumers when they purchase a good at a price which is less than or equal to their willingness to pay for it. It is the difference between the consumers willingness to pay and the actual price of the good.

$CS= (Jena's Willingness - Actual price) + (Jane's willingness -  Actual price)$

$CS= (75 -65) + (85-65)$

$CS= 10 + 20$

$CS= 30$

Therefore, the total consumer surplus is $30.

Answer 2

Answer: $30

Explanation: Consumer Surplus measures the difference between the maximum price a consumer of a good or service is willing to pay for and the actual price the consumer pays for the good or service. It helps determine the welfare that consumers receive from buying a product. In calculating consumer surplus, the difference between the highest price a consumer is willing to pay and the actual market price of the good is taken.

Highest price Jena is willing to pay =$75

Highest price Jane is willing to pay = $85

Actual price = $65

Consumer surplus for Jena = $(75 - 65) = $10

Consumer surplus for Jane = $(85 - 65) = $20

Therefore, the combined amount of consumer surplus of Jena and Jane = $( 10 + 20) = $30