The total surplus with $30 market price and with $15 market price.
Explanation of Solution
Table 1 shows the market price spent and the maximum wiliness to pay by the different potential buyers as follows:
Table 1
Potential buyers | Maximum | Market price |
B | $60 | $30 |
J | 45 | 30 |
S | 35 | 30 |
Jam | 25 | 30 |
F | 10 | 30 |
From this table, it is clear that the maximum willingness to pay of “Jam” and “F” is less than the market price or actual pay, and they would not consume at the market price. Therefore, they can be ignored from the total
The calculation of consumer surplus with market price $30 is given as follows:
The total consumer surplus is 50.
Table 2 shows the market price spent and the minimum willingness to sell by the different potential buyers as follows:
Table 2
Potential buyers | Minimum willingness to sell | Market price |
F | $60 | $30 |
B | 45 | 30 |
A | 35 | 30 |
P | 25 | 30 |
Ali | 10 | 30 |
From this table, it is clear that the minimum willingness to sell price of “F“, “B”, and “A” is greater than the market price or actual pay. Therefore, they will not be ready to sell the product with the given market price. Thus, they can be ignored from the total
The calculation of producer surplus with market price $30 is given as follows:
The total producer surplus is $25.
The total surplus can be calculated as follows:
The total surplus is $75.
Table 3 shows the market price spent and the maximum wiliness to pay by the different potential buyers as follows:
Table 3
Potential buyers | Maximum willingness to pay | Market price |
B | $60 | $15 |
J | 45 | 15 |
S | 35 | 15 |
Jam | 25 | 15 |
F | 10 | 15 |
From this table, it is clear that the maximum willingness to pay for “F” is less than the market price or actual pay, and he would not consume at the market price. Therefore, he can be ignored from the total consumer surplus calculation.
the calculation of consumer surplus with market price $15 is given as follows:
The total consumer surplus is 105.
Table 1 shows the market price spent and the minimum willingness to sell by the different potential buyers as follows:
Table 4
Potential buyers | Minimum willingness to sell | Market price |
F | $60 | 15 |
B | 45 | 15 |
A | 35 | 15 |
P | 25 | 15 |
Ali | 10 | 15 |
From this table, it is clear that the minimum willingness to sell price of “F“, “B”, “A”, and “F” is greater than the market price or actual pay. Therefore, they will not be ready to sell the product with the given market price. Thus, they can be ignored from the total producer surplus calculation.
The calculation of producer surplus with market price $15 is given as follows:
The total producer surplus is $5.
The total surplus can be calculated as follows:
Total surplus is $110.
Consumer surplus: Consumer surplus is the difference between the highest willing price of a consumer and the actual price that the consumer pays.
Producer surplus: It is the difference between the lowest willing price accepted by the producer and the actual price received by the producer.
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Chapter 3 Solutions
Micro Economics For Today
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning