Chapter 6

At a price of $4 for a slice of pizza, Alfred buys a slice. Betty and Charles, however, do not buy slices because they are not willing to pay $4 for a slice. Thus, we move to point a on the demand curve.

Alfred is willing to pay $4 for a slice and he pays $4 for his slice. The amount Alfred is willing to pay equals the amount he actually does pay, so Alfred has no consumer surplus.

Even though Alfred has no consumer surplus, he's not as unhappy as before because at least now he's buying a slice of pizza; Betty and Charles, however, are still unhappy because they still are unwilling to buy a slice of pizza. We can see this relative state of pleasure in the figure. But, what happens if the price continues to fall, say to $3 per slice of pizza? Click on point b in Figure 1.