Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for $14, a second lawn for $17, and a third lawn for $24. Also suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay $33 to have her lawn mowed, Mr. Wilson would be willing to pay $26, and Ms. Smith would be willing to pay $24.
If Tim offers to mow lawns for $24 each, what will be his producer surplus?
Considering Mrs. Jones, Mr. Wilson, and Ms. Smith together, what will be their consumer surplus?
14 + 17 + 24 = 55
24 + 24 + 24 = 72
Producer Surplus = $17
Tim makes $17 more than he is initially willing to charge, thus a surplus of 17.
33 + 26 + 24 = 83
24 + 24 + 24 = 72
Consumer Surplus = $11
The customers pay $11 less than they are initially willing to pay, thus a surplus of 11.
Everybody wins, yay capitalism
