Question

"Malik, a high school senior, is offered a job walking his neighbor’s dog for an hour each Friday afternoon. His reservation wage for this task is $6. If Malik’s neighbor offers him $15 per hour, how much economic surplus will Malik enjoy each week as a result of accepting this job?

Answer 1

Malik will experience an economic surplus of $9 per hour by accepting a dog walking job that pays well above his reservation wage.

Step-by-step explanation:

Malik enjoys an economic surplus of $9 per hour by accepting the dog-walking job at a rate higher than his reservation wage.

Malik's reservation wage is the minimum amount he is willing to accept to perform a task, which is $6 per hour. His neighbor offers him $15 per hour, which is well above his reservation wage. To calculate his economic surplus, we subtract the reservation wage from the offered wage. So, Malik's economic surplus is $15 - $6 = $9 per hour. This is the additional value he gets per hour over the minimum he was willing to accept for his labor. The concept of economic surplus is important in understanding an individual's satisfaction or benefit from a transaction, beyond the minimum required to make the transaction happen.