Question

Consider the market for socks. The current price of a pair of plain white socks is $5.00. Two consumers, Jeff and Samir, are willing to pay $7.25 and $8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair. How much is total consumer surplus in this market?

Answer 1

Total consumer surplus in this market is $5.25

Step-by-step explanation:

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,

Jeff is willing to pay $7.25 and he actually pay $5.00

Surplus is $2.25

Samir is willing to pay $8.00 and he actually pay $5.00

Surplus is $3.00

To get Total consumer surplus, we must add both surplus

Total consumer surplus=$2.25+$3.00=$5.25