A consumer values a house at $525,000 and a producer values the same house at $485,000.If the transaction is completed at $510,000,the transaction will generate:

Question

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The consumer's willingness to pay (or value) for the house is $525,000, while the producer's cost (or value) is $485,000. The transaction is completed at $510,000, which is between the two parties' values.
Therefore, the buyer (consumer) gains a buyer surplus of $15,000 ($525,000 - $510,000), and the seller (producer) gains a seller surplus of $25,000 ($510,000 - $485,000). Together, they generate a total surplus of $40,000.

A Consumer Values a House at $525,000 and a Producer