Fred is willing to pay $5 for his first slice of pizza and $4 for his second slice of pizza. If the price is $3, and Joe buys two slices of pizza, he receives a total consumer surplus of A) $4. B) $2. C) $7. D) $3

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Business

Jadon Hays

24 January, 19:01

Fred is willing to pay $5 for his first slice of pizza and $4 for his second slice of pizza. If the price is $3, and Joe buys two slices of pizza, he receives a total consumer surplus of A) $4. B) $2. C) $7. D) $3

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Eve Duke · Answer 1

D) $3

Explanation:

Consumer Surplus refers to the difference between the actual price paid by a consumer and the price the consumer was willing to pay. Surplus arises in cases wherein the price consumer was willing to pay exceeds the price he actually paid.

In the given case, the consumer was willing to pay a total of $9 i. e ($5 + $4) for 2 units of pizza. He actually ended up paying $6 i. e ($3 * 2 slices).

Thus, his total consumer surplus can be calculated as $9 - $6 = $3