If Charlie buys the T-shirt, then his consumer surplus is D. $1.
Consumer surplus = Consumer willingness to pay for T-shirts - Actual amount paid by a consumer for T-shirts
= $10 - $9
= $1
Consumer surplus = maximum price buyer is willing to pay – actual price. The consumer surplus formula for multiple consumers can be expressed as follows: Consumer Surplus = ½ * demanded quality at equilibrium * (maximum price buyer is willing to pay – market rate).
On a supply and demand diagram, consumer surplus is the area (normally a triangular area) above the equilibrium price of the good and below the demand curve. The point at which a price stabilizes–so that both consumers and producers get maximum surplus in an economy–is known as the market equilibrium.
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