Consumer_Surplus_Practice_AK

Consumer_Surplus_Practice_AK - ECON 200 B Practice Problems...

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Practice Problems CONSUMER SURPLUS Wednesday, April 21 st , 2010 a. Note that Seung will determine which restaurant to eat at based on consumer surplus. Recall we need to find three things to find the consumer surplus: Step One: How much will that person consume? Step Two: What is the total value of that quantity of consumption? Step Three: What is the total expenditure for that quantity? Step Four: Consumer surplus = total value – total expenditure We need to do all these steps for Seung for both goods at both restaurants. At Risso’s: Step One: The consumer will consume an additional unit as long as MV P. Price pizza = $17 Seung will consume 3 pizzas Price salad = $2 Seung will consume 5 salads Step Two: Total value of pizza = 25 + 21 + 17 = $63 Total value of salad = 6 + 5 + 4 + 3 + 2 = $30 Step Three: Total expenditure on pizza = 3 x $17 = $51 Total expenditure on salad = 5 x $ 2 = $10 Step four: Consumer surplus for pizza at Risso’s = $63 - $51 = $12
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Consumer_Surplus_Practice_AK - ECON 200 B Practice Problems...

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