Fred's demand schedule for movie DVDs is as follows: At $60, he would buy 1; at $50, he would buy two; at $30, he would buy 3; and at $20, he would buy 4. If the price of movie DVDs equals $40, the consumer surplus Fred receives from purchasing movie DVDs would be:
A)$20.
B)$30.
C)$40.
D)$110.

Question

Fred's demand schedule for movie DVDs is as follows: At $60, he would buy 1; at $50, he would buy two; at $30, he would buy 3; and at $20, he would buy 4. If the price of movie DVDs equals $40, the consumer surplus Fred receives from purchasing movie DVDs would be:
A)​$20.
B)​$30.
C)​$40.
D)​$110.

Quizplus · Accepted Answer

The consumer surplus is the difference between the maximum amount that a consumer is willing to pay for a good and the actual price paid.

In this case, Fred's willingness to pay for 2 DVDs is $100 ($50 per DVD x 2 DVDs), but he only pays $80 ($40 per DVD x 2 DVDs).

Therefore, his consumer surplus is $20 ($100 - $80).

Fred's Demand Schedule for Movie DVDs Is as Follows: at $60