Consumer surplus is defined as the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e. the market price).

Consumer Surplus and Types of Goods

Consumer surplus is the difference between the price that a consumer is willing to pay for a product and the actual price that they have to pay. It is an important concept in economics as it helps in understanding the behavior of consumers and the pricing strategies of producers. The consumer surplus can vary depending on the type of goods that are being consumed. In this context, the following are the different types of goods and their impact on consumer surplus.

Comforts and Consumer Surplus

Comforts are goods that are not essential for survival but provide a higher level of satisfaction to the consumer. Examples of comfort goods include high-end fashion items, luxury cars, and expensive watches. In the case of comforts, the consumer surplus is usually high. This is because consumers are willing to pay a premium for these goods in order to enjoy the higher level of satisfaction that they provide. Producers of comfort goods also tend to charge a premium price for their products, which further increases the consumer surplus.

Necessities and Consumer Surplus

Necessities are goods that are essential for survival. Examples of necessities include food, water, and shelter. In the case of necessities, the consumer surplus is usually low. This is because consumers are willing to pay only what is necessary to obtain these goods. Producers of necessities also tend to charge lower prices as these goods are required for basic survival.

Inferior Goods and Consumer Surplus

Inferior goods are goods that are consumed less as the income of the consumer increases. Examples of inferior goods include low-quality food items and inexpensive clothing. In the case of inferior goods, the consumer surplus is usually low. This is because consumers are willing to pay only a small amount for these goods as they are of lower quality and do not provide a high level of satisfaction.

Conclusion

In conclusion, the consumer surplus can vary depending on the type of goods that are being consumed. Comforts tend to have a higher consumer surplus as consumers are willing to pay a premium for these goods in order to enjoy a higher level of satisfaction. Necessities tend to have a lower consumer surplus as consumers are willing to pay only what is necessary to obtain these goods. Inferior goods also tend to have a low consumer surplus as these goods are of lower quality and do not provide a high level of satisfaction.

The correct answer is D) Necessities