What is the consumer surplus for Maria?
A) $4
B) $3
C) $1
D) $5
The consumer surplus for Maria is $5.
Understanding Consumer Surplus
Consumer surplus is a measure of the economic gain that buyers experience when they are able to purchase a product for less than the maximum price they are willing to pay. In the case of Maria and her burger purchases, we can calculate her consumer surplus by comparing her maximum willingness to pay with the market price for each burger.
Calculating Consumer Surplus for Maria:
For the first burger, Maria is willing to pay $20 but the market price is $16. The consumer surplus for the first burger is $20 - $16 = $4.
For the second burger, Maria is willing to pay $17 but the market price is $16. The consumer surplus for the second burger is $17 - $16 = $1.
For the third burger, Maria is willing to pay $15 but the market price is $16. Since the market price is higher than her maximum willingness to pay, there is no consumer surplus for the third burger.
To find the total consumer surplus for Maria, we add up the consumer surpluses for each burger: $4 + $1 + $0 = $5. This means that Maria experiences a consumer surplus of $5 in total for the three burger purchases.
Understanding consumer surplus is important in analyzing consumer behavior and welfare economics. It helps us understand how individuals benefit from transactions and the overall efficiency of markets in allocating resources. By calculating consumer surplus, we can gain insights into consumer preferences, price sensitivity, and market equilibrium.
Overall, consumer surplus is a valuable metric in evaluating the well-being of consumers and the efficiency of markets in meeting consumer demand.