Economics Test 2 Corrections Alan Zhao 11/12/2010 Question 5: Reason why the scenario at Filene’s bargain basement could yield a higher consumer surplus is because the basement is not filled with all potential buyers at the same time. With each passing month, the price of the items in the store will drop a certain price until a consumer with his or her own individual “willingness to buy” price preference buys the item. However, some people do not visit the basement on a monthly basis on the exact day the price changes. In addition, customer tastes vary from one person to the next, meaning a consumer could achieve a higher surplus if he bought an item in the basement at a certain price than if another consumer bought the same item at that price. This does not normally happen at a dutch auction because everyone is present. However, it may be coincidence that an item in the basement a consumer was willing to buy at 100 dollars is only 50 dollars, when it is worth about 120 dollars to most other consumers. So this
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This note was uploaded on 02/24/2011 for the course ECON ECON 201 taught by Professor Elzinga during the Spring '09 term at UVA.