Question

Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a machine that could store and replay that much music. How much consumer surplus does your roommate enjoy from the iPod? *

Answer 1

$300

Step-by-step explanation:

Consumer surplus refers to the gain a customer has when the price of a product is lower than what they are willing to pay. According to this, the consumer surplus would be:

Price the customer was willing to pay: $500

Price paid: $200

$500-$200=$300

According to this, your roommate enjoyed from the iPod a consumer surplus of $300 because she was willing to pay $500 and she paid $200.