The Joy of Savings: Nancy's Consumer Surplus Explained

What is consumer surplus and how does it relate to Nancy's purchase of car mats?

Consumer surplus is a measure of the difference between the price a consumer is willing to pay and what they actually pay for a given product or service. In Nancy's case, she paid $55 for car mats but was willing to pay $80. What is Nancy's consumer surplus?

Consumer Surplus Explained

Consumer surplus is a concept in economics that represents the additional value or benefit that a consumer receives when they are able to purchase a product for less than what they are willing to pay. In Nancy's situation, her consumer surplus for the car mats is $25.

When Nancy paid $55 for the car mats, she had a level of satisfaction that was higher than what she actually paid for the product. This means that she gained an extra $25 in value from the purchase, reflecting her consumer surplus.

Consumer surplus is important because it showcases the satisfaction that consumers derive from their purchases. It also highlights the efficiency of a market in delivering value to consumers. In Nancy's case, her consumer surplus of $25 indicates that she was able to benefit from the purchase of the car mats beyond what she initially expected.