CHAPTER 7CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS143buy the album at a price more than his willingness to pay, and would be indiffer-ent about buying the album at a price exactly equal to his willingness to pay.To sell your album, you begin the bidding at a low price, say $10. Because allfour buyers are willing to pay much more, the price rises quickly. The biddingstops when John bids $80 (or slightly more). At this point, Paul, George, and Ringohave dropped out of the bidding, because they are unwilling to bid any more than$80. John pays you $80 and gets the album. Note that the album has gone to thebuyer who values the album most highly.What benefit does John receive from buying the Elvis Presley album? In asense, John has found a real bargain: He is willing to pay $100 for the album butpays only $80 for it. We say that John receives consumer surplusof $20. Consumersurplusis the amount a buyer is willing to pay for a good minus the amount thebuyer actually pays for it.
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