Question

Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for $14​, a second lawn for ​$15​, and a third lawn for $22. Also suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay $33 to have her lawn​ mowed, Mr. Wilson would be willing to pay $27​, and Ms. Smith would be willing to pay $22.

If Tim offers to mow lawns for $22 each, what will be his producer​ surplus?  

Considering Mrs.​ Jones, Mr.​ Wilson, and Ms. Smith​ together, what will be their consumer​ surplus? 

I figured 16 dollars for the producer surplus but I am not sure how to get the consumer surplus.

Answer 1

The producer​ surplus is $15

The consumer surplus is $16

Step-by-step explanation:

The producer surplus is the difference between the minimum selling price and the real price.

So, Producer surplus in the first lawn is $22-$14=$8

Producer surplus in the second lawn is $22-$15=$7

Producer surplus in the first lawn is $22-$22=$0

Total surplus is the addition of all of them

Total surplus=$8+$7+$0=$15

The consumer surplus is the gap between the maximum price that the consumer is willing to pay and the price the consumer actually pay.

In this case,

Mrs. Jones was willing to pay $33 and he actually pay $22

Consumer Surplus is $11

Mr. Wilson would be willing to pay $27​ and he actually pay $22.00

Consumer Surplus is $5

Ms. Smith would be willing to pay $22 and he actually pay $22.00

Consumer Surplus is $0

To get Total consumer surplus, we must add all

Total consumer surplus=$11+$5+$0=$16