Question

Elvis values the first gravy sandwich at $5, the second at $4.50, and the third at $4. If he buys three sandwiches for $4 each, his consumer surplus has a value of _____

Answer 1

Consumer Surplus = $1.50

Step-by-step explanation:

Consumer surplus is the difference between what a consumer is willing to pay for a given amount of goods or services and what he ends up paying.

Therefore,

Consumer surplus = Amount consumer is willing to pay less amount paid

Given that

Elvis is willing to pay 5 + 4 + 4.50 = 13.50 for three

Price of 3 sandwich = 3 × 4 = 12

Consumer surplus = 13.50 - 12

= $1.50