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12 votes
12 votes
Suppose that Michelle buys a cappuccino from Paul's Cafe and Bakery for $4.75. Michelle was willing to pay up to $6.75 for the cappuccino and Paul's Cafe and Bakery was willing to accept S1.25 for the cappuccino. Based on this information, answer the questions below.

Michelle's consumer surplus is equal to: _______
Paul's Bakery's producer surplus is equal to:__________

User Antoine Viscardi
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1 Answer

9 votes
9 votes

Answer:

$2

$3.50

Step-by-step explanation:

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.

Consumer surplus = willingness to pay – price of the good

$6.75 - $4.75 = $2

Producer surplus is the difference between the price of a good and the least price the seller is willing to sell the product

Producer surplus = price – least price the seller is willing to accept

$4.75 - $1.25 = $3.5

User Sujivasagam
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