Asked by James Bertakis on Jul 09, 2024
Verified
(Figure: Gain in Consumer Surplus) Look at the figure Gain in Consumer Surplus.Identify the area or areas that represent the gain in consumer surplus to consumers already participating in the market when the price falls from P1 to P2.
A) A and B
B) B
C) B and C
D) C
Consumer Surplus
The distinction between the total sum consumers are ready and financially equipped to pay for a product or service, and the sum they actually end up paying.
- Scrutinize the effects that price shifts have on consumer surplus and the cumulative surplus in a market environment.
Verified Answer
SP
sweta patelJul 14, 2024
Final Answer :
B
Explanation :
Consumer surplus increases for consumers already in the market when the price falls because they are now paying less for the same quantity of goods. The area representing the gain in consumer surplus for these consumers is directly above the new price level and below the demand curve, up to the initial quantity consumed before the price drop. This is represented by area B, as it is the area between the old and new prices for the original quantity of goods consumed.
Learning Objectives
- Scrutinize the effects that price shifts have on consumer surplus and the cumulative surplus in a market environment.