Question

Identify whether each of the following statements best illustrates the concept of consumer surplus, producer surplus, or neither.

a. I was willing to pay up to $68 for a used textbook and even though the seller was willing to go as low as $61 in order to sell it, we couldn't reach a deal because the government imposed a price ceiling of $56 on the sale of textbooks.
b. Even though I was willing to pay up to $115 for a used laptop, I bought a used laptop for only $110.
c. I sold a watch for $59, even though I was willing to go as low as $53 in order to sell it.

Answer 1

neither

consumer surplus

producer surplus

Step-by-step explanation:

A in a no transaction took place so there is neither

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

$115 - $110 = $5

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

$59 - $53 = $6