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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Melissa buys an iPhone for $240 and gets consumer surplus of $160.

a. What is her willingness to pay?

b. If she had bought the iPhone on sale for $180, what would her consumer surplus have been?

c. If the price of an iPhone were $500, what would her consumer surplus have been?

Subpart (a):

To determine
Calculate the maximum willing price.

Explanation

Here, the price of the phone that she has bought is given as $240 and the consumer surplus that she received from the purchase of the phone is $160. We all know that the consumer surplus is the difference between the maximum willing to pay price and the actual price that the consumer pays. Thus, in order to calculate the maximum willing to pay price of the consumer, we can add the actual price and the consumer surplus together as follows:

Consumer surplus=Maximum willing&#

Subpart (b):

To determine
Calculate the consumer surplus.

Sub part (c):

To determine
Consumer decision of buying the goods related with maximum willing to buy price.

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