Question

Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is $650. Denise A. buys the dishwasher, and on her purchase she experiences a consumer surplus of $-150. B. buys the dishwasher, and on her purchase she experiences a consumer surplus of $150. C. does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0. D. does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $150.

Answer 1

Denise would experience a negative consumer surplus of $-150 if she buys the dishwasher for $650, valuing it at $500. If she doesn't buy it, the consumer surplus is $0, as there is no transaction.

Step-by-step explanation:

Consumer surplus represents the difference between what a consumer is willing to pay for a good or service and what they actually pay. In the case of Denise and the stainless steel dishwasher, if she values the dishwasher at $500 but it is priced at $650, and she chooses to purchase it, Denise would experience a negative consumer surplus of $-150. This is because she paid $150 more than what she values it for.

If Denise decided not to buy the dishwasher at $650, she would not experience any consumer surplus, as there is no transaction taking place. Therefore, from the choices provided:
A. Incorrect because purchasing at a higher price than what she values it for results in negative surplus,
B. Incorrect because purchasing at a higher price does not yield a positive surplus,
C. Correct because without making a purchase, the consumer surplus is zero,
D. Incorrect because not purchasing cannot result in a positive surplus.

Answer 2

C. does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0.

Step-by-step explanation:

A consumer surplus is the difference between what a consumer pays for an item and what they are willing to pay. In this case Denise is willing to pay $500 and pays $650. The amount she pays is more than she is willing to pay hence her consumer surplus can't be negative. This means it will be 0.