1. Consumer Surplus
Suppose a consumer would be willing to pay $6 for the first cup of coffee of the day, $5 for the second cup, $4 for the third cup and $3 for the fourth cup, $2 for the fifth cup…
If the price of a cup of coffee is $3 per cup, how many cups will the consumer buy in a day? ___________________
On the first cup, this consumer earns $3 in “surplus” because she is willing to pay $6 but only pay $3 for the cup
What surplus is earned on the 2nd cup?________________
…the third cup? ___________________
…the fourth cup? __________________
Given that cups are only being consumed in who # units, what is the total surplus this consumer earns on her purchase of 4 cups of coffee per day? ___________________
