You are a dog walker. You are willing to accept as low as $12 per dog walk. Your neighbor has a dog and she is willing to pay as much as $15 per walk.Suppose, instead, you walk her dog for $13. In this case, what is the TOTAL SURPLUS associated with this dog walk? Remember total surplus equals consumer surplus plus producer surplus (just enter numerals, no dollar signs or words)
Question
You are a dog walker. You are willing to accept as low as 15 per walk.Suppose, instead, you walk her dog for $13. In this case, what is the TOTAL SURPLUS associated with this dog walk? Remember total surplus equals consumer surplus plus producer surplus (just enter numerals, no dollar signs or words)
Solution
The total surplus is calculated by adding the consumer surplus and the producer surplus.
The consumer surplus is the difference between the maximum price the consumer is willing to pay and the actual price they pay. In this case, the neighbor is willing to pay 13, so the consumer surplus is 13 = $2.
The producer surplus is the difference between the actual price the producer receives and the minimum price they are willing to accept. In this case, you receive 12, so the producer surplus is 12 = $1.
Adding these together, the total surplus is 1 (producer surplus) = $3.
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