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In Economic theory and policy making, ‘Consumer Welfare’ is deemed to be maximized when 
  • a)
    All individuals are able to purchase goods beyond their means of earning 
  • b)
    A large number of individuals are able to purchase goods at a much lower market price that they were willing to pay 
  • c)
    All individuals attain an ideal state of having no demand for any more goods and services 
  • d)
    Every individual is able to purchase goods at the exact market price they were willing to pay
Correct answer is option 'B'. Can you explain this answer?
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In Economic theory and policy making, ‘Consumer Welfare’ i...
Explanation:
Consumer welfare is maximized when a large number of individuals are able to purchase goods at a much lower market price than they were willing to pay. This is because:
- Consumer Surplus: When consumers are able to purchase goods at a lower price than their maximum willingness to pay, they experience consumer surplus. Consumer surplus is the difference between the price they actually pay and the price they were willing to pay. Maximizing consumer welfare involves maximizing consumer surplus.
- Increased Purchasing Power: Lower prices allow consumers to purchase more goods and services with their given income, leading to an increase in their purchasing power. This enhances consumer welfare as individuals can afford more goods and services, improving their standard of living.
- Increased Access: Lower prices make goods more accessible to a larger number of individuals who may have been previously unable to afford them. This increases consumer welfare by ensuring a wider range of individuals can benefit from the consumption of goods and services.
- Competition and Efficiency: Lower prices often result from increased competition in the market, leading to greater efficiency and innovation. This benefits consumers by providing them with better quality products at lower prices, further maximizing consumer welfare.
In conclusion, maximizing consumer welfare by allowing individuals to purchase goods at a much lower market price than they were willing to pay is essential for promoting consumer surplus, increasing purchasing power, enhancing access, and fostering competition and efficiency in the market.
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In Economic theory and policy making, ‘Consumer Welfare’ i...
Consumer welfare refers to the individual benefits derived from the consumption of goods and services. The central idea in consumer welfare is to enhance consumer surplus which is the difference between what people prefer to pay and what they actually pay. The greater the difference, higher is the surplus. It means that the market is allocating goods most efficiently (at competitive prices) to people.
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Passage 2After the end of World War II, a pervasive, but unfortunately fallacious, economic perspective took hold. Based on the United States successful emergence from the Depression, the idea that war was good for an economy became fashionable. However, linking the United States economic recovery with its entry into World War II is a prime example offlawed economic thinking.Supporters of the war benefits economy theory hold that a country at war is a country with a booming economy. Industry must produce weapons, supplies, food, and clothing for the troops. The increased production necessitates the hiring of more people, reducing unemployment. More employment means more money in the pockets of citizens, who are then likely to go out and spend that money, helping the retail sector of the economy. Retail shops experience an increase in business and may need to hire more workers, further reducing unemployment and adding to the economic momentum. While this scenario sounds good in theory, it does not accurately represent what truly happens in a war time economy.In reality, the government can fund a war in a combination of three ways. It can raise taxes, cut spending on other areas, or increase the national debt. Each of these strategies has a negative impact on the economy. An increase in taxes takes money out of an individuals hands, leading to a reduction in consumer spending.Clearly, there is no net benefit to the economy in that case. Cutting spending in other areas has its costs as well, even if they are not as obvious.Any reduction in government spending means the imposition of a greater burden on the benefactors of that government spending. Cutbacks in a particular program mean that the people who normally depend on that program now must spend more of their money to make up for the government cuts. This also takes money out of consumers hands and leaves the economy depressed. Of course, a government could go into debt during the war, but such a strategy simply means that at some point in the future, taxes must be increased or spending decreased. Plus, the interest on the debt must be paid as well.Q. The second paragraph of the passage performs which of the following functions?

Passage 2After the end of World War II, a pervasive, but unfortunately fallacious, economic perspective took hold. Based on the United States successful emergence from the Depression, the idea that war was good for an economy became fashionable. However, linking the United States economic recovery with its entry into World War II is a prime example offlawed economic thinking.Supporters of the war benefits economy theory hold that a country at war is a country with a booming economy. Industry must produce weapons, supplies, food, and clothing for the troops. The increased production necessitates the hiring of more people, reducing unemployment. More employment means more money in the pockets of citizens, who are then likely to go out and spend that money, helping the retail sector of the economy. Retail shops experience an increase in business and may need to hire more workers, further reducing unemployment and adding to the economic momentum. While this scenario sounds good in theory, it does not accurately represent what truly happens in a war time economy.In reality, the government can fund a war in a combination of three ways. It can raise taxes, cut spending on other areas, or increase the national debt. Each of these strategies has a negative impact on the economy. An increase in taxes takes money out of an individuals hands, leading to a reduction in consumer spending.Clearly, there is no net benefit to the economy in that case. Cutting spending in other areas has its costs as well, even if they are not as obvious.Any reduction in government spending means the imposition of a greater burden on the benefactors of that government spending. Cutbacks in a particular program mean that the people who normally depend on that program now must spend more of their money to make up for the government cuts. This also takes money out of consumers hands and leaves the economy depressed. Of course, a government could go into debt during the war, but such a strategy simply means that at some point in the future, taxes must be increased or spending decreased. Plus, the interest on the debt must be paid as well.Q. Which of the following situations best mirrors the effect that cutting spending in government programs has, as detailed in the passage?

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In Economic theory and policy making, ‘Consumer Welfare’ is deemed to be maximized whena)All individuals are able to purchase goods beyond their means of earningb)A large number of individuals are able to purchase goods at a much lower market price that they were willing to payc)All individuals attain an ideal state of having no demand for any more goods and servicesd)Every individual is able to purchase goods at the exact market price they were willing to payCorrect answer is option 'B'. Can you explain this answer?
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In Economic theory and policy making, ‘Consumer Welfare’ is deemed to be maximized whena)All individuals are able to purchase goods beyond their means of earningb)A large number of individuals are able to purchase goods at a much lower market price that they were willing to payc)All individuals attain an ideal state of having no demand for any more goods and servicesd)Every individual is able to purchase goods at the exact market price they were willing to payCorrect answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about In Economic theory and policy making, ‘Consumer Welfare’ is deemed to be maximized whena)All individuals are able to purchase goods beyond their means of earningb)A large number of individuals are able to purchase goods at a much lower market price that they were willing to payc)All individuals attain an ideal state of having no demand for any more goods and servicesd)Every individual is able to purchase goods at the exact market price they were willing to payCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In Economic theory and policy making, ‘Consumer Welfare’ is deemed to be maximized whena)All individuals are able to purchase goods beyond their means of earningb)A large number of individuals are able to purchase goods at a much lower market price that they were willing to payc)All individuals attain an ideal state of having no demand for any more goods and servicesd)Every individual is able to purchase goods at the exact market price they were willing to payCorrect answer is option 'B'. Can you explain this answer?.
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