Question

Suppose that Nike creates a new UK t-shirt for the basketball season. When asked how much they w ould be

willing to pay for this new shirt:

Logan says he is willing to pay $30

Shelby says she is willing to pay $27

Alex says he is willing to be $25

Luke says he is willing to pay $18

Nigel says he is w illing pay $18

Emily says she is willing to pay $10

  

If the shirts end up selling for a price of $20, what is the total amount of consumer surplus that will occur in the

market?

	A.	82$
	B.	60$
	C.	22$
	D.	14$

Answer 1

If the Shirt is selling at $ 20 than people those are willing to pay more than $20 only they could buy the shirt . Logan , Shelby and Alex will buy the shirt .

Total revenue that will generate is

Price × Quantity = $20× 3 = $60

But the price consumer which are willing to pay

Logan = $ 30

Shelby = $27

Alex = $ 25

Total they are willing to pay = $ 82

Consumer Surplus =

Total consumer willing to pay - Total revenue

= $82 - $ 60

= $ 22

Consumer Surplus = $ 22

Correct answer is C