Asked by Joanna Harrison on May 27, 2024
Verified
Refer to Figure 7-1. Suppose that the price falls from P2 to P1. Area C represents the
A) decrease in consumer surplus that results from a downward-sloping demand curve.
B) consumer surplus to new consumers who enter the market when the price falls.
C) additional consumer surplus to initial consumers.
D) decrease in consumer surplus in the market when the price increases from P1 to P2.
Downward-sloping Demand Curve
A graph showing that the quantity demanded of a good or service varies inversely with its price, other things being equal.
- Examine visual depictions of the impact of price alterations on consumer surplus.
Verified Answer
HK
Hardeep KharoudMay 27, 2024
Final Answer :
B
Explanation :
Area C represents the consumer surplus gained by new consumers who enter the market as a result of the price decrease. This is because when the price drops, consumers who were previously unwilling or unable to purchase the product at the higher price are now willing and able to buy it, thus gaining consumer surplus.
Learning Objectives
- Examine visual depictions of the impact of price alterations on consumer surplus.