Question

There are 4 people in the market for Pineapple Pizza. The reservation prices for these 4...

There are 4 people in the market for Pineapple Pizza. The reservation prices for these 4 people are ($15, $12, $10, $6) respectively. Assume the price of a Pineapple Pizza is $8.

The gross consumer's surplus in this market is: $

The net consumer's surplus in this market is: $

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Answer #1

The utility from consuming "n" units of the discrete good is just the area of the first "n" bars which make up the demand function. this is true because the height of each bar is the reservation price associated with that level of demand and the width of each bar is 1.

The GROSS SURPLUS = 15 +12 + 10 = $37

The NET CONSUMER SURPLUS = 7 + 4 + 2 = $13

Dear Student/ Learner, it was my great pleasure to help you solving this problem. I wish you best luck for your learning endeavour.
Happy Learning

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