Question

Mary is willing to pay K50 for a Christmas tree, John is willing to pay K45 and Jeff is willing to pay K40. The price of the Christmas tree is K40. The total consumer surplus for Mary, John and Jeff taken together is:
a. K15
b. K135
c. 40
d. K95
e. K120
Show working out.

Answer 1

To find the total consumer surplus for Mary, John, and Jeff, we need to calculate the surplus for each person and then add them together.

Consumer Surplus for Mary:
Mary's willingness to pay: K50
Price of Christmas tree: K40
Consumer surplus for Mary: K50 - K40 = K10

Consumer Surplus for John:
John's willingness to pay: K45
Price of Christmas tree: K40
Consumer surplus for John: K45 - K40 = K5

Consumer Surplus for Jeff:
Jeff's willingness to pay: K40
Price of Christmas tree: K40
Consumer surplus for Jeff: K40 - K40 = K0

Total consumer surplus:
K10 (Mary) + K5 (John) + K0 (Jeff) = K15

Therefore, the total consumer surplus for Mary, John, and Jeff taken together is K15, which means the correct answer is:
a. K15