Question

A ticket reseller purchases a ticket to a football game for $40 and offers it for sale at a price of $75. A consumer is willing to pay $90 at most for the ticket, and purchases it at $75. What does the $50 difference (between $40 and $90) represent?

Answer 1

The difference of $50 is Profit plus the Consumer surplus

Explanation:

• Profit is the financial gain which the business gained through the activity minus the expenses. It is the income which is left out after the aggregate cost is subtracted from the aggregate revenue.

• So, here profit is the difference among the price which is $75 and the cost which is $40.

• Consumer surplus is the difference among the price which the consumer pay for the product and the price they willing to pay.

• So, in thus case, consumer surplus is the difference among the consumer willing to pay, which is $90 and the price, which is $75.

• Therefore, the difference is both consumer surplus and profit.

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