Question

Suppose that the price of a donut is​ $1 each. Lorena is willing to pay​ $2 for the first​ donut, Ricky is willing to pay​ $1.80 for the second​ donut, Jennifer is willing to pay​ $1.50 for the third​ donut, and Betty is willing to pay​ $1.20 for the fourth donut. In​ equilibrium, what is the total consumer surplus from the consumption of​ donuts?

Answer 1

Answer: The answer is $2.5

Explanation:

First donut surplus

$2- $1= $1

Second donut surplus

$1.80 -$ 1= $0.80

Third donut surplus

$1.50 -$ 1= $0.50

Fourth donut surplus

$1.20 - $1= $0.20

Total surplus = $1 + $0.80 +$0.50 + $0.20 = $2.5

Answer 2

The total consumer surplus from the consumption of donuts by Lorena, Ricky, Jennifer and Betty will be $2.50 in an equilibrium.

What is consumer surplus?

The premium paid by a consumer in essence of consumption of units of a product for deriving maximum utility is known as the consumer surplus. Using the given information, consumer surpluses will be as,

1. For Lorena – $2 – $1=$1;
2. For Ricky, $1.80 – $1 = $0.80;
3. For Jennifer, $1.50 – $1 = $0.50;
4. For Betty, $1.20 – $1 = $0.20.

Thus, the total consumer surplus will be,

1 + 0.80 + 0.50 + 0.20 = $2.50

Hence, the significance of consumer surplus is as aforementioned.

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