tailored clothes

Tailored Clothes
Author’s Name
Institutional Affiliation

Tailored Clothes
Consumer surplus is attained when the actual price paid by a consumer for a product is less than the one they are ready to pay. A demand curve can be used to demonstrate what the buyers are ready to pay for a particular product based on their private benefit expectations (Economics Online, 2018). In the case study, the consumer is willing to pay 200 USD for a tailored dress and the tailor finally offers the dress at 150 USD. The consumer surplus, in this case, is 50 USD, which is calculated by subtracting the actual price paid from the amount of money the consumer was ready to spend on the product. This surplus makes the consumer buy the product willingly thinking that it is cheaper than he initially expected.
Producer surplus is a private benefit that producers gain when the price the consumer pays them in the market is more than the price they were ready to receive from the supply of the product (Economics Online, 2018). In the case study, the seller was prepared to dispose of the dress at 100 USD. However, the product is finally sold at 150 USD. Therefore, the producer surplus, in this case, is 50 USD which is calculated by subtracting the price paid by the consumer from the seller cost. This surplus makes the producer dispose of the product more willing because it adds to the initially projected profits.
Recently, I wanted to purchase a set of golf clubs for casual players. Ideally, the prices tend to vary depending on the quality of metal used in making the clubs.

I, therefore, wanted a set made from stainless steel and was prepared to pay 400 USD for them from a dealer. On arriving at the dealers’ premises, the price attached for the set was 370 USD. In this case, I gained a consumer surplus of 30 USD. The law of demand presents consumers as rational agents who prefer more for less. Therefore, an increase in consumer surplus motivates the consumer to buy more. As the consumer buys more of a product, the utility derived decreases especially for a normal. Furthermore, a decrease in consumer surplus makes the consumer buy less of a product. Besides an increase in producer surplus increases the utility derived by manufacturers from selling a good, hence motivating them to produce more. Conversely, a decrease in producer surplus demotivates the manufacturers making them produce less of a good.

References
Economics Online. (2018). Consumer Surplus. Retrieved on August 30, 2018, from http://www.economicsonline.co.uk/Competitive_markets/Consumer_and_producer_surplus.html