A restaurant sells hot wings. A consumers demand for hotwings can be shown as:
Number of hot wing servings and the willingness to pay for hotwings (each serving)
a. If the price of an additional serving of hotwings is $6, how many servings will be purchased? How much consumer surplus does will you receive?
|Consumer Surplus with a price of $6|
b. Imagine the price of a serving of hotwings is $8. By how much does your consumer surplus decrease compared to the previous week?
|Consumer Surplus with a price of $8|
c. One week later, you return to the restaurant again. You discover that the restaurant is offering an “all-you-can-eat” special for $24. How many hotwings will you eat now and how much consumer surplus do you receive now?
|Consumer Surplus with all you can eat.|
d. Suppose you own the restaurant and your demand curve represents a “typical” customer. What is the highest price you can charge for the “all-you-can-eat” special and still attract customers?
Finally, we can answer (d) using information from (c). If your consumer surplus is $36, the maximum you would be able to charge and still have them take the deal is $36. However, at this price people would be indifferent between doing the deal or not, so it would make more sense to charge $35.99 in order to ensure they take the deal (and have positive consumer surplus).