Jackson has a limited budget and needs to replace the flooring in his home. If his willingness to pay for flooring is \$800 and the market prices for different flooring options are as follows, which option would result in the greatest consumer surplus for Jackson?

• A. Hardwood flooring at \$900
• B. Laminate flooring at \$600
• C. Tile flooring at \$750
• D. Carpet flooring at \$850

Answer: (B)

Verified step by step guidance

1. Identify Jackson's willingness to pay (WTP), which is the maximum amount he values the flooring at. Here, WTP = \$800.
2. List the market prices for each flooring option: Hardwood = \$900, Laminate = \$600, Tile = \$750, Carpet = \$850.
3. Calculate the consumer surplus for each option using the formula: \(\text{Consumer Surplus} = \text{WTP} - \text{Price}\), but only if the price is less than or equal to the WTP (otherwise, consumer surplus is zero or negative, meaning no purchase).
4. Compare the consumer surplus values for all options where the price is less than or equal to \$800 to determine which option yields the greatest consumer surplus.
5. Select the flooring option with the highest positive consumer surplus as the one that provides Jackson the greatest benefit given his budget.