Question

A. Consumer Surplus from Drinking Beer Jasmine and Leonard are EC 120 students who regularly get together at a bar for beer Friday after class. The table shows their Friday marginal benefit (MB) schedules for beer, with marginal benefit measured as "number of dollars per beer." The price of a beer is $5 Jasmine and Leonard each buy two beers Beer First Second Third Fourth Marginal Benefit Jasmine Leonard 20 15 13 4 A1. Compute Jasmine's consumer surplus, Make sure you state exactly how consumer surplus is measured -not just a number, a number of something. In purchasing two beers, is Jasmine behaving rationally or irrationally? Explain your answer A2. Compute Leonard's consumer surplus. Make sure you state exactly how consumer surplus is measured -not just a number, a number of something. In purchasing two beers, is Leonard behaving rationally or irrationally? Explain your answer.

Answer 1

Let us first define what consumer surplus is consumer surplus refers to the difference between The toral amount of money which a consumer is willing to pay (indicated bt a demand curve) and the total amount of money he actually pays (i.e the prevailing market price) Consumer surplus = Marginal benefit - price By purchasing 2 Beer, Jasmine is behaving retionally because she has a positive consumer surplus she is paying less ($ 5) than what she is willing to pay ($ 15) By purchasing 2 Beer, Leonard is behaving irrationally because his consumer surpluys is negative He is paying more than what he is willing to pay [3 < 5]

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