Suppose there are three identical flats available to be purchased

Economics Sep 30, 2020

Suppose there are three identical flats available to be purchased. Buyer 1 is willing to pay €30,000 for one, buyer 2 is willing to pay €25,000 for one, and buyer 3 is willing to pay €20,000for one. If the price is €25,000, how many flats will be sold and what is the value of consumer surplus in this market?

Expert Solution

Equilibrium price= €25,000

According to the equilibrium price, 2 flats will be sold because it's price equal to the equilibrium price. For flat 1 it is higher and for 3 it is lower.

Consumer surplus= €30,000+ €25,000+ €20,000- 3* €25,000

= €0

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