Question

Andre walks Julia’s dog once a day for $50 per week. Julia values this service at $60 per week, while the opportunity cost of Andre’s time is $30 per week. The government places a tax of $35 per week on dog walkers. Before the tax, what is the total surplus?

Answer 1

Answer:

$25

Explanation:

Consumer surplus is defined as the difference between the price of a good or service and what a consumer is willing to pay for that good or service. Julia's surplus = $60 - $50 = $10

Supplier surplus is defined as the difference between the price of a good or service and the price at which the supplier would be willing to sell his goods or services. Andre's surplus = $50 - $35 = $15

total surplus = Julia's and Andre's surplus = $10 + $15 = $25