Question

By selling a television at $1,200 for which consumers are willing to pay up to $1,300, a consumer electronics firm makes a profit of $500 per unit. what is the economic value created in this scenario?

Answer 1

Given:
selling price : 1,200
willing to pay: 1,300
profit : 500 per unit.

economic value created is solved by adding the consumer surplus and the firms' profit.

consumer surplus is the excess amount of the consumer's willing to pay amount and the actual selling price.

economic value created = (1,300 - 1,200) + 500 = 100 + 500 = 600