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2 cards from this section. Quick, good the night before a test.
What is consumer surplus?
Think of the benefit you get from buying a product for less than its value.
If a consumer is willing to pay $50 for a book and buys it for $30, what is their consumer surplus?
Subtract the actual price from the maximum price they were willing to pay.
What does consumer surplus represent?
Think about how much more someone values a product compared to its cost.
True or False: Consumer surplus increases when prices rise.
Consider how higher prices impact consumer satisfaction.
A local bakery is known for its cupcakes. If 100 customers value the cupcakes at $5 each but pay $3, calculate the total consumer surplus if all 100 customers buy one cupcake.
multiply the number of consumers by the individual consumer surplus.
Analyze the change in consumer surplus if a new competitor enters the market causing the price of cupcakes to fall from $3 to $2. What happens to consumer surplus?
Think about how a price decrease impacts total surplus.
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