Question

Patricia decides to buy a pair of boots for $85.00. She was willing to pay $110.00. When her friend Cecilia sees the boots, she loves them and thinks they are worth $170.00. So she offers Patricia $135.00 for the boots, and Patricia accepts. Patricia and Cecilia are both thrilled with the exchange.
The total surplus received by both Patricia and Cecilia is $ _________

Answer 1

Answer:

$60

Explanation:

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.

Consumer surplus = willingness to pay – price of the good

Consumer surplus received by Patricia = $110 - $85 = $25

Consumer surplus received by Cecilia = $170 - $135 = $35

Sum of the surpluses = $25 + $35 = $60