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In fact, willingness to pay is a definition of behavioral economics. It denotes the largest amount and the price which a consumer is willing to pay for a unit of goods or services (Mankiw, 2017). For example, a willingness to pay will arise from a person who is fond of collecting rare editions of books. In this case, a bookworm will buy the original Harry Potter edition at a huge price. The cost of the goods does not matter due to a shortage of the product. The reason is simple the available way to buy it is from an eBay seller.
Moreover, the situation based on the concept of willingness to sell can occur with a seller as well. The cost of the product can be calculated based on the competitors prices and even set slightly lower to attract more demand. Hence, an owner of the Harry Potter rare edition would receive a larger amount than he or she expected. Additionally, selling the book at the eBay auction would bring a profit above its value in the store where it was purchased, and above the value originally set on eBay.
The consumer surplus is a benefit received by consumers for certain reasons. They can buy a product at a price lower than the highest price; they would be willing to pay (Mankiw, 2017). For instance, a sports fan wants to buy a ticket to a sporting event. The ticket cost is $200, and he or she has already agreed to pay this amount. However, before the start of the event, unsold tickets have sharply fallen in price by half to minimize risks and increase demand for them. A person has already bought this ticket for $100, and it turns out that the remaining $100 represents the consumers surplus . Thus, sellers attracted customers and were able to sell all the tickets without losing potential profit, and buyers saved money.
For instance, an employee of the company was given a 90% discount on the purchase of tickets for the Vegas Show. A person, without hesitation, bought tickets for relatives, all acquaintances and friends. However, not everyone agreed to attend this event for any reason. An employee decides to sell tickets through eBay, so the cost of these tickets will be at least 40% more expensive. Thereby, a person will receive additional income, thanks to the producer surplus .
Reference
Mankiw, N.G. (2017). Principles of macroeconomics (8th ed.). Cengage Learning.
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