Consumer Surplus: Slam-Dunk Example

David Henderson

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I was going over consumer surplus in my class on Tuesday and a student gave me a fresh example that he had learned from his economics professor as an undergrad at the U.S. Naval Academy. Here it is.

You go into a store and find a sweater that you like. The price tag on it is $50. You don't notice another sign saying that there's a sale on these items and that the discount is 40%. You decide you value the sweater more than $50 and so you go to the sales clerk to buy it. When she goes to ring you up, she tells you that there's a 40% discount. So you pay $30. You get at least $20 in consumer surplus.

HT to Joe Monahan.

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CATEGORIES: Economic Education

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Foobarista writes:

Here's another example: we were recently in Lijiang in Yunnan province in western China. We went to what was widely regarded as the best Naxi (the main ethnicity in Lijiang) music and dance show in the area, and the only tickets available were "VIP" tickets that cost 3x the base price. But all other showings were absolutely sold out, and we were leaving before any shows with tickets available were showing, so we went ahead, paid the equivalent of $50 per person, and figured we were paying the equivalent of a cheap Broadway or Vegas price for a very good show.

The show itself was "worth it".

Posted April 26, 2012 11:17 AM

Floccina writes:

At least a $20 surplus, maybe more.

Posted April 26, 2012 3:09 PM

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