If Jacqueline is willing to accept $1 for a cupcake and Jameson is willing to pay $3 for a cupcake, the consumer surplus will ________ if the negotiated price is $1.50 as opposed to $2.00.

Question

Quizplus · Accepted Answer

The consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. If Jameson is willing to pay $3 for a cupcake, at a price of $1.50, his consumer surplus is $1.50 ($3 - $1.50). If the price increases to $2.00, his consumer surplus decreases to $1.00 ($3 - $2.00). Therefore, the consumer surplus increases when the price is lower.

If Jacqueline Is Willing to Accept $1 for a Cupcake