Question

Identify whether each of the following statements best illustrates the concept of consumer surplus, producer surplus, or neither. Statement Consumer Surplus Producer Surplus Neither Even though I was willing to pay up to $73 for a watch, I bought a watch for only $65. I paid $53 for a jersey sweater last week. This week, the same store is selling sweaters for $43. I sold a used textbook for $45, even though I was willing to go as low as $36 in order to sell it.

Answer 1

I was willing to pay up to $73 for a watch, I bought a watch for only $65. consumer surplus

Neither - I paid $53 for a jersey sweater last week. This week, the same store is selling sweaters for $43.

I sold a used textbook for $45, even though I was willing to go as low as $36 in order to sell it. producer surplus

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

the consumer surplus for the individual buying the watch = $73 - $65 = $8

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

the producer surplus for the textbook seller = $45 - $36 = $9

the jersey purchase statement represent neither consumer or producer surplus because the willingness to pay and the highest amount the seller would be willing to sell was not indicated

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