Question

1. John buys a slice of pizza for 4.66 dollars, and his consumer surplus is 0.57 dollars. How much is John willing to pay for the slice of pizza?

2.Kate drinks Pepsi. She can buy as many cans of Pepsi as she wishes at a price of $ 0.98 per can. On a particular day, she is willing to pay $ 2.49 for the first can, $1.20 for the second can, $1.00 for the third can, and $0.40 for the fourth can. Assume Kate is rational in deciding how many cans to buy. Her consumer surplus is:

Answer 1

Ans:

1)

John willing to pay for the slice of pizza = 5.23 dollars

Explanation

Consumer surplus = Price consumers are willing to pay - Price paid by consumers.

Price consumers are willing to pay = Consumer surplus + Price paid by consumers

John willing to pay for the slice of pizza = Consumer surplus + Price paid by John

= 0.57 dollars +  4.66 dollars

= 5.23 dollars

2)

Consumer surplus = $1.75

Explanation

The price of fourth can is $0.98 and Kate is willing to pay $0.40 for the fourth can. Assuming Kate is rational in deciding how many cans to buy, Kate will buy three cans.

Consumer surplus = Price consumers are willing to pay - Price paid by consumers.

Consumer surplus = ($2.49 - $0.98) + ($1.20 - $0.98) + ($1 - $0.98)

= $1.51 + $0.22 + $0.02

= $1.75