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4 September, 06:03

Suppose the market price is $5. The buyer who buys the first unit of output has a willingness-to-buy equal to $10; the buyer who buys the second unit of output has a willingness-to-buy equal to $9; and the buyer who buys the third unit of output has a willingness-to-buy equal to $8. Total consumer surplus is: $12. $27. $10. $5.

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  1. 4 September, 07:57
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    Total consumer surplus is $12

    Explanation:

    Consumer surplus refers to the benefit derived by the consumer from the amount he is willing to pay as against market price. For example, Glee is willing to pay $10 for a product. The market price of the product is $5. His consumer surplus will be $5 (benefit).

    Here, market price is $5.

    Buyer is willing to spend $10 for first unit. Consumer surplus is $5 (10 - 5)

    Buyer is willing to spend $9 for second unit. Consumer surplus is $4 (9 - 5)

    Buyer is willing to spend $8 for third unit. Consumer surplus is $3 (8 - 5)

    Total consumer surplus is $12 (5 + 4 + 3)
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