Question

If Avery is willing to pay $10 for a pizza, Pia is willing to pay $13, and Sylvio is willing to pay $15, how much consumer surplus is achieved when the price of pizza is $12?

Answer 1

$4

Explanation:

Total consumer surplus is given by the difference between the willingness to pay of each customer to the actual price of a good.

Since Avery is only willing to pay $10 and the pizza costs $12, Avery will not buy a pizza and should not be considered for consumer surplus.

Since Pia is willing to pay $13, and Sylvio is willing to pay $15, consumer surplus is:

`S = (\$13-\$12)+(\$15-\$12)\\S=\$4`

When the price of pizza is $12, a consumer surplus of $4 is achieved.