Microeconomics – Consumer and Producer Surplus

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Topic: Tailored Clothes

  1. Assume that you were ready to buy a custom tailored dress (or men’s suit) and you are prepared to pay up to $200 for it. Also assume that the tailor is prepared to sell that item of clothing for as little as $100. When you arrive at the tailor shop, the posted price for the item is $150. Discuss how this scenario relates to producer and consumer surplus and how such surpluses, if any, affect buying and manufacturing decisions.
  2. Discuss any recent purchases you have made and for which you feel that a similar rationale seemed to be at work.

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