Question

Assume felix is willing to pay $8 for a pizza cutter. tim also wants one, but would only be willing to pay $6 for one. at a pizza baker\'s convention, felix buys the last pizza cutter at the market price just before tim could buy it. tim contacts the convention organizers and complains about missing out on the last pizza cutter. the organizers refund felix for the pizza cutter and allow tim to buy it at the market price. what happens as a result of this move?

Answer 1

Answer: Consumer surplus will decrease

Step-by-step explanation: Consumer surplus is the total amount of benefit the consumers get when they buy a good at a price that is less than their willingness to pay for it.

Consumer surplus = Willingness to pay - Market price

When Felix buy the last cutter at the market price of $5, the CS is,

`CS= $8 - $5 = $3`

When Tim buys the last cutter at the market price of $5, the CS is,

`CS= $6 - $5 = $1`

Thus, the CS falls by $2.