Alex experiences the largest loss of consumer surplus when the price of orange increases from $0.70 to $1.40
Alex, Barb and Carlos are the three potential buyers of oranges. The below table shows their willingness power to pay for the first three oranges of the day. Assume they are only three buyer of oranges and per day only three oranges can be supplied.
First Orange Second Orange Third Orange
Alex $2.00 $1.50 $0.75
Barb $1.50 $1.00 $0.80
Carlos $0.75 $0.25 $0
Consumer Surplus is referred to as difference between consumer willing power to buy a good or service and the actual market price. Consumer surplus is based on the marginal utility theory that explains that spending behavior varies with individual preferences. Due to different spending behavior, people spend differently on a service or good, a surplus is created.
Consumer surplus can be calculated as
Consumer surplus = Customer willingness to buy – actual market price
Hence in the above scenario, to consume the third orange the marginal utility is reduced as compared to the gain from the first orange. In this question, the price per unit of orange increases from $0.7 to $1.4. therefore, Alex expereince the largest loss of consumer surplus.
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You can learn more about consumer surplus at https://brainly.com/question/13573671
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