(Note: this is a formula question and may change each time you attempt the question)

Practice with consumer & producer surplus.

Assume John is willing to pay (WTP) up to $9.4 for an apple, and Sarai is willing to sell (WTA or "willingness to accept") an apple for as low as $0.8.

The price in the market for an apple is $3.

What is consumer surplus?

Note: enter answer with only numerical values and round up to the nearest tenth. For example, if you think the answer is "$101.58" then enter the answer "101.6" in the space below.

Question

(Note: this is a formula question and may change each time you attempt the question)

Practice with consumer & producer surplus.

Assume John is willing to pay (WTP) up to $9.4 for an apple, and Sarai is willing to sell (WTA or "willingness to accept") an apple for as low as $0.8.

The price in the market for an apple is $3.

What is consumer surplus?

Note: enter answer with only numerical values and round up to the nearest tenth. For example, if you think the answer is "$101.58" then enter the answer "101.6" in the space below.

BlackTom AI · Accepted Answer

Start by identifying what consumer surplus represents in this context: it's the extra happiness or benefit a consumer gets from paying less than what they were willing to pay for a good.
Next, note the key values given: John’s maximum willingness to pay (WTP) for an apple is 9.4, and the market price is 3.
Because 3 is below John’s WTP, John gains some surplus from this purchase; if the price exceeded his WTP, he would gain nothing, so the surplus formula would yield zero in that case.
For a single consumer purchasing at a fixed market price, the consumer surplus is calculated as WTP minus price, provided the price is less than or equal to WTP. If price were higher than WTP, CS would be zero since no transaction would occur at a loss for the consumer.
Plug in the numbers: WTP = 9.4 and price P = 3. Then compute the difference 9.4 − 3. This difference represents the amount by which John values the transaction more than what he pays, i.e., the consumer surplus per apple for John.
Consider the rounding instruction: the problem asks to round to the nearest tenth. After computing the difference, you would round the resulting value to one decimal place if necessary. The exact arithmetic yields a value of 9.4 minus 3 equals 6.4, which is already at one decimal place.
Remember that Sarai’s WTA of 0.8 is relevant for producer surplus calculations or for assessing whether a trade would occur at a given price, but for this question we are focused on consumer surplus, which depends on WTP minus price for the buyer involved.
If you were solving for practice, you would repeat this approach for any other buyers with different WTP values and compare to the market price to determine whether a surplus exists and how large it would be per unit.

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