Question

The most you would be willing to pay for having a freshly washed car before going out on a date is $7. The smallest amount for which you would be willing to wash someone else's car is$4. You are going out this evening and your car is dirty. How much economic surplus would you receive from washing it?

Answer 1

The economic surplus is a sum total of consumer surplus and producer surplus. In this case, we will get consumer surplus which can be defined as the difference between the amount we are willing to give for consuming a service and the actual amount we are giving for that service.

The minimum price of a car wash service can be $4 and the maximum for the same service is $7. By washing the car ourselves we are saving $3. So, we can say we are getting a total economic surplus of $3 by washing the car.