Akbar bought a $40 a ticket to a comedy show. He values the show at $167. Birbal values watching the show at $136. If I force Akbar to give his ticket to Birbal what is the change in total surplus? Do not include the $ sign and remember to include a negative sign if you want to say that surplus has decreased

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Asked Oct 5, 2019
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Akbar bought a $40 a ticket to a comedy show. He values the show at $167. Birbal values watching the show at $136. If I force Akbar to give his ticket to Birbal what is the change in total surplus? Do not include the $ sign and remember to include a negative sign if you want to say that surplus has decreased

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Expert Answer

Step 1

Consumer Surplus: It refers to the difference between the maximum price the buyer is willing to pay and the market price of the good. Willingness to pay is presented by the demand curve. So, the area under the demand curve and above market price is considered as consumer surplus.

PRICE
(IN $)
Consumer Surplus
Supply Curve
Market P1
Price
Demand Curve
Q1
Quantity
(IN UNITS)
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PRICE (IN $) Consumer Surplus Supply Curve Market P1 Price Demand Curve Q1 Quantity (IN UNITS)

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Step 2

Total surplus when Akbar go for comedy show is calculated as follows:

Surplus Akbar's willingness to pay - Price paid by akbar
Surplus 167-40
Surplus 127
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Surplus Akbar's willingness to pay - Price paid by akbar Surplus 167-40 Surplus 127

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Step 3

Total surplus when Birbal go for comedy...

Surplus Birbal's willingness to pay - Price paid by Birbal
Surplus 136-40
Surplus 96
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Surplus Birbal's willingness to pay - Price paid by Birbal Surplus 136-40 Surplus 96

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