Question

13. Danielle agrees to wash clothes for her roommate, Jenny. Jenny pays Danielle $30 to do her laundry. Danielle’s cost of doing the laundry is $10 and Jenny would be willing to pay as much as $40 to have her clothes washed each week. For this exchange between Jenny and Danielle, the consumer surplus is _____ and the producer surplus is ________. (need work shown)

Answer 1

Danielle agrees to wash clothes for her roommate, Jenny. Jenny pays Danielle $30 to do her laundry. Danielle’s cost of doing the laundry is $10 and Jenny would be willing to pay as much as $40 to have her clothes washed each week. For this exchange between Jenny and Danielle, the consumer surplus is $10 (40-30) (the difference between what the Jenny is willing to pay and what she actually pays) and the producer surplus is $20 (30-10) (The difference between the price and the cost). The price that a seller receives or is paid for a good minus the seller's cost.