Question

For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Adrian, sophie , and Ryan are the only three buyers of oranges, and only three oranges can be supplied per day. Adrian 2.00 $1.50 $0.75 Sophie $1.50 $1.00 $0.80 Ryan $0.75 $0.25 $0. If the market price of an orange is $1.20, then consumer surplus amounts to

Answer 1

Solution :-

Orange : - >	First	Second	Third
Adrian	$2.00	$1.50	$0.75
Sophie	$1.50	$1.00	$0.80
Ryan	$0.75	$0.25	$1.20

Consumer Surplus is the situation where willingness is greater than market Price

Now if Market Price $1.20

Consumer surplus

Adrian = ( $2.00 - $1.20 ) + ( $1.50 - $1.20 ) + $0.00 = $1.10

Sophie = ( $1.50 - $1.20 ) + $0.00 + $0.00 = $0.30

Ryan = $0.00 + $0.00 + $0.00 = $0.00

total Consumer surplus = $1.10 + $0.30 = $1.40

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