A consumer's maximum willingness to pay for four successive bags of rice is ₦15,000, ₦13,000, ₦11,000, and ₦9,000 respectively. If the prevailing market price per bag is ₦9,000, what is the total consumer surplus derived in Naira?
Answer: 12000 ₦
Answer
The total consumer surplus derived by the consumer is ₦12,000.
Consumer surplus is the difference between total willingness to pay and total actual expenditure. The total willingness to pay for the 4 bags of rice is ₦15,000 + ₦13,000 + ₦11,000 + ₦9,000 = ₦48,000. Since each bag costs ₦9,000, total expenditure for 4 bags is 4 × ₦9,000 = ₦36,000. Subtracting ₦36,000 from ₦48,000 gives a consumer surplus of ₦12,000.
Step-by-Step Solution
Key Concept
Concept and Calculation of Consumer Surplus
Alternative Method
Alternatively, calculate the individual surplus for each unit (Willingness to Pay - Market Price) and sum them up: 1st unit (₦15,000 - ₦9,000 = ₦6,000), 2nd unit (₦13,000 - ₦9,000 = ₦4,000), 3rd unit (₦11,000 - ₦9,000 = ₦2,000), 4th unit (₦9,000 - ₦9,000 = ₦0). Total Consumer Surplus = ₦6,000 + ₦4,000 + ₦2,000 + ₦0 = ₦12,000.
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