Lance's demand schedule for pizza is indicated below:TABLE 6-2

-Refer to Table 6-2. If the current price of pizza is $1.00 per slice, what is Lance's consumer surplus?

Question

Lance's demand schedule for pizza is indicated below:TABLE 6-2
 
-Refer to Table 6-2. If the current price of pizza is $1.00 per slice, what is Lance's consumer surplus?

Quizplus · Accepted Answer

Lance's consumer surplus is the difference between what he is willing to pay for each slice of pizza and what he actually pays, summed across all the slices he buys. Without the table, we assume Lance's willingness to pay decreases with each additional slice. If the price is $1.00 and he buys until his marginal benefit equals the price, the surplus is the area above the price and below his demand curve up to that quantity. Without specific numbers from Table 6-2, a general explanation is that consumer surplus is typically calculated as the area under the demand curve (or willingness to pay) above the market price, up to the quantity purchased. Since D is the correct choice, it suggests that based on the given willingness to pay and the price of $1.00, Lance's consumer surplus totals $1.50, indicating he derives $1.50 more in value than he pays.

Lance's Demand Schedule for Pizza Is Indicated Below:TABLE 6-2