Four people each have a different willingness to pay for one unit of a good: George will pay $15, Glen will pay $12, Tom will pay $10, and Peter will pay $8. If price decreases from $9 to $8 then the consumer surplus from this unit will increase by
A) $3.
B) $4.
C) $2.
D) $1.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the price a consumer is willing to pay for a good and the price they actually pay. In this case, the price decreases from $9 to $8, so the consumer surplus for each person increases by the difference between their willingness to pay and the new price. For George, this is $15 - $8 = $7; for Glen, it is $12 - $8 = $4; for Tom, it is $10 - $8 = $2; and for Peter, it is $8 - $8 = $0. The total increase in consumer surplus is $7 + $4 + $2 + $0 = $13.

Four People Each Have a Different Willingness to Pay for One