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If total utility of a commodity is 5 and marginal utility is 1, a person consumes 3 units. What is the consumer surplus?
- a)4
- b)3
- c)6
- d)2
Correct answer is option 'D'. Can you explain this answer?
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If total utility of a commodity is 5 and marginal utility is 1, a pers...
The concept of consumer surplus is the difference between the total utility received by a consumer and the total amount that the consumer is willing to pay for that utility. In this case, the total utility is 5 and the consumer has consumed 3 units, with a marginal utility of 1.
To calculate the consumer surplus, we need to first determine the total amount that the consumer is willing to pay for the 3 units consumed. This can be found by multiplying the marginal utility by the number of units consumed, which gives us a total utility of 3.
Next, we subtract the total amount that the consumer is willing to pay (3) from the total utility received (5) to find the consumer surplus, which is 2.
Therefore, the correct answer is option D, 2.
To calculate the consumer surplus, we need to first determine the total amount that the consumer is willing to pay for the 3 units consumed. This can be found by multiplying the marginal utility by the number of units consumed, which gives us a total utility of 3.
Next, we subtract the total amount that the consumer is willing to pay (3) from the total utility received (5) to find the consumer surplus, which is 2.
Therefore, the correct answer is option D, 2.
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If total utility of a commodity is 5 and marginal utility is 1, a person consumes 3 units. What is the consumer surplus?a)4b)3c)6d)2Correct answer is option 'D'. Can you explain this answer?
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