Question 5 (b)(i)
Priya's willingness to pay for the iPhone
2 marks
- Time to write
- About 4 minutes
Question
Question 5 (b)(i) · 2 marksPriya buys an iPhone for $280 and gets consumer surplus of $200.
- What is her willingness to pay?
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Write it in this order
- 1 Willingness to pay as price plus consumer surplus 2 marks 4 min
Try it first. About 4 minutes for 2 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Consumer surplus and willingness to pay. A buyer's willingness to pay is the most she would pay for a good. Her consumer surplus is the gap between that amount and the price she actually pays:
Consumer surplus = willingness to pay − price, so willingness to pay = price + consumer surplus.
Willingness to pay. Priya pays $280 and gains $200 of consumer surplus:
Willingness to pay = $280 + $200 = $480.
Answer. Priya's willingness to pay for the iPhone is $480: she would have paid up to $480, so buying it at $280 leaves her $200 better off.
Where the 2 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Willingness to pay as price plus consumer surplus | 2 |
| Total | 2 |
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