consumer surplus

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Consumer Surplus Institution Student Course Date Consumer surplus = consumer willingness to buy – the actual price of good/service To plot the graph of consumer surplus, each apartment has to be evaluated separately according to Lori Landlord’s willingness to pay less than the actual price to repaint the apartment (Brynjolfsson & Smith, 2003). The happiness of every consumer to have consumer surplus in his/her purchases rather than deficit. Consumer deficit occurs when the willingness to buy is less than the actual price charged to acquire a certain good or service. The value of his consumer surplus to have the apartments repainting will be as follows: 1st apartment = $er000 - $ 5000 = $ 0 2nd apartment = $ 4000 -$ 5000 = $ -1000 3rd apartment = $3000 -$ 5000 = $ -2000 4th apartment = $2000 -$ 5000 = $ -3000 5th apartment = $1000 -$ 5000 = $ -4000 Below is the graph of consumer surplus against the apartment houses In case the price of repainting the apartments fall down to $ 2000 each, the value of consumer surplus for the apartments will be as follows: 1st apartment = $ 5000 - $ 2000 = $ 3000 2nd apartment = $ 4000 -$ 2000 = $ 2000 3rd apartment = $3000 -$ 2000 = $ 1000 4th apartment = $2000 -$ 2000 = $ 0 5th apartment = $1000 -$ 2000 = $ -1000 Since the value of consumer surplus is positive the 1st, 2nd, 3rd, and 4th apartments, Lori Landlord will have them repainted. The 5th apartment house will not be repainted because its value for consumer surplus is negative. Total value for Lori’s consumer surplus will be as follows: Total consumer surplus = summation of individual apartments value of consumer surplus $ 3000 + $ 2000

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