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 pay up to $20 each for 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 some clothes. How much consumer surplus did Hugo receive from the tenth scarf he purchased? Assuming Hugo follows the Rational Rule for Buyers, why did Hugo only purchase 10 scarves when they were on sale? Shouldn't he have purchased more since they were such a good deal compared to what he was willing to pay? Now suppose the manager at Macy’s had 100 scarves in inventory. She decided to put the scarves on sale for $10, but an employee accidentally listed the sales price as $12. To the manager’s surprise, the store sold all 100 scarves at the $12 sales price. How much producer surplus did Macy’s receive from the hundredth scarf sold?
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 pay up to $20 each for 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 some clothes.
How much
Assuming Hugo follows the Rational Rule for Buyers, why did Hugo only purchase 10 scarves when they were on sale? Shouldn't he have purchased more since they were such a good deal compared to what he was willing to pay?
Now suppose the manager at Macy’s had 100 scarves in inventory. She decided to put the scarves on sale for $10, but an employee accidentally listed the sales price as $12. To the manager’s surprise, the store sold all 100 scarves at the $12 sales price.
How much
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