Question

On a shopping trip, Melanie decided to buy a light blue coat made from woven fabric. A tag on the coat stated that the price was $79.95. When she brought the coast to the store's sales clerk, Melanie was told that the coat was on sale, and she would pay 20 percent less than the price on the tag. After the discount was applied, Melanie paid $63.96, $15.99 less than the original price. The value of Melanie's consumer surplus from this purchase is

A. $79.95 since this is the price she is willing to pay
B. at least $15.99 since this is the difference between the price Melanie is willing to pay for the cont and the actual price she pays, but she could have be willing to pay more than $79.95 for the coat
C. exactly $15.99 since this is the difference between the maximum price Melanie is willing to pay for the cost and the actual price she pays.
D. $63.96 since this is the actual price she pays.

Answer 1

Answer: 5

Explanation: C

Consumer surplus is the difference between the quantity that a consumer is eager to pay for any product and the amount that he or she really ends up paying for that commodity. In this question Melanie was expecting to pay $79.95 when she saw the tag. Later she came to know that the coat was on a sale and she would have to pay 20% less. She finally paid $63.96 that is $15.99 less than the stated price $15.99. Thus, $15.99 is the consumers' surplus.