Suppose a consumer would be willing to pay S6 for the first cup of coffee of the

Question

Suppose a consumer would be willing to pay S6 for the first cup of coffee of the day, S5 for the second cup, $4 for the third cup and $3 for the fourth cup, $2 for the fifth cup... rtheance ofa cup of coffee is S3 per cup, how many cups will the consumer buy in a day? On the first cup, this consumer earns $3 in "surplus" because she is willing to pay S6 but only pay S3 for the cup What surplus is earned on the 2nd cup? ...the third cup? ...the fourth cup? Given that cups are only being consumed in who # units, what is the total surplus this consumer earns on her purchase of 4 cups of coffee per day? This is a graph of what the consumer is willing to pay and the market price.

Explanation / Answer

If the price of coffee is $3 per cup, the consumer will buy four cups of coffee in a day. This is because when she purchase the fourth cup of coffee, he is willing to pay the price which is just equal to the actual price of coffee. On the second cup, this consumer will earns $2 in "surplus'' because she is willing to pay $5 but only pay $3 for the cup On the third cup, the consumer will earns$1 in''surplus'' because she is willing to pay $4 but only pay $3 for the cup. on the fourth cup, the consumer will eans $0 in "surplus" because she is willing to pay $3 and also pay $3 for the cup. The total surplus this consumer earns is $6 on her purchase of 4 cups of coffee per day. That is, $6 =($3+$2+$1) is the total surplus consumer will earn every day on the purchase of 4 cups of coffee with price $3 of coffee. The consumer surplus will look like a triangle that is an area under the D curve and above market price.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.