Reservation Price After reading chapter 3 you should now have a good understand of both supply and demand. The demand curve represents the most consumers are willing and able to pay for a good or service at alternative prices. The prices represented along the demand curve show the absolute most a consumer is willing and able to pay for a good or service. In economics we call this a consumer's reservation price. The consumer's goal in the market place is to maximize his/her satisfaction (i.e., utility) given a limited amount of income. If he/she pays well below his/her reservation price then a deal is had (economists call this consumer surplus). Most, if not all, of you subscribe to internet service. I want you to think about the utility you get from this service and then tell me your reservation price for this monthly service (i.e., the absolute most you'd be willing and able to pay). After you give your reservation price, explain how you came to this amount. In other words, explain to me why this service is so highly or lowly valued. Finally, take your reservation price and subtract it from your actual monthly subscription fee to calculate your consumer surplus. Example: Internet service monthly reservation price: $100 Reason: I have a relatively high reservation price for this service because I work at home and the only way I can submit my work and communicate with my clients is through email. Consumer surplus: $100 reservation price $ 35 actual monthly fee $ 65 consumer surplus