CA Foundation Exam > CA Foundation Questions > By consumer surplus economists meana)the area...
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By consumer surplus economists mean
- a)the area inside the budget line.
- b)the area between the average revenue and marginal revenue curves.
- c)the different between the maximum amount a person is willing to pay for a good and its market price.
- d)none of the above.
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
By consumer surplus economists meana)the area inside the budget line.b...
Explanation:
Consumer surplus is a term used in economics to refer to the difference between the maximum amount that a person is willing to pay for a good or service and the actual price that they pay in the market. In other words, it is the extra benefit or utility that consumers receive from purchasing a good or service at a price that is lower than what they were willing to pay.
Here are the details of the options mentioned in the question:
A) The area inside the budget line: The budget line is a graphical representation of the different combinations of two goods that a consumer can purchase with a given income and prices. The area inside the budget line represents all the affordable combinations of goods. However, this area does not represent consumer surplus.
B) The area between the average revenue and marginal revenue curves: This option is specific to the concept of producer surplus, not consumer surplus. The average revenue and marginal revenue curves show the revenue generated by a firm per unit of output and the additional revenue generated by selling one more unit, respectively.
C) The difference between the maximum amount a person is willing to pay for a good and its market price: As mentioned earlier, this is the correct definition of consumer surplus. It represents the extra benefit or utility that consumers receive from purchasing a good or service at a price that is lower than what they were willing to pay.
D) None of the above: Option D is incorrect, as option C is the correct definition of consumer surplus.
In summary, consumer surplus is the extra benefit or utility that consumers receive from purchasing a good or service at a price that is lower than what they were willing to pay. It is calculated as the difference between the maximum amount that a person is willing to pay for a good or service and the actual price that they pay in the market.
Consumer surplus is a term used in economics to refer to the difference between the maximum amount that a person is willing to pay for a good or service and the actual price that they pay in the market. In other words, it is the extra benefit or utility that consumers receive from purchasing a good or service at a price that is lower than what they were willing to pay.
Here are the details of the options mentioned in the question:
A) The area inside the budget line: The budget line is a graphical representation of the different combinations of two goods that a consumer can purchase with a given income and prices. The area inside the budget line represents all the affordable combinations of goods. However, this area does not represent consumer surplus.
B) The area between the average revenue and marginal revenue curves: This option is specific to the concept of producer surplus, not consumer surplus. The average revenue and marginal revenue curves show the revenue generated by a firm per unit of output and the additional revenue generated by selling one more unit, respectively.
C) The difference between the maximum amount a person is willing to pay for a good and its market price: As mentioned earlier, this is the correct definition of consumer surplus. It represents the extra benefit or utility that consumers receive from purchasing a good or service at a price that is lower than what they were willing to pay.
D) None of the above: Option D is incorrect, as option C is the correct definition of consumer surplus.
In summary, consumer surplus is the extra benefit or utility that consumers receive from purchasing a good or service at a price that is lower than what they were willing to pay. It is calculated as the difference between the maximum amount that a person is willing to pay for a good or service and the actual price that they pay in the market.
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By consumer surplus economists meana)the area inside the budget line.b...
Consumer surplus means for instance, A willing to buy a watch for 2000( this is the willing to spend money for that product) but the market price of that watch is 1500 only. which means balance 500 is the " consumer surplus".
so the different between the maximum amount a person willing to pay for a good and it's market price is a consumer surplus.
so the different between the maximum amount a person willing to pay for a good and it's market price is a consumer surplus.
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By consumer surplus economists meana)the area inside the budget line.b)the area between the average revenue and marginal revenue curves.c)the different between the maximum amount a person is willing to pay for a good and its market price.d)none of the above.Correct answer is option 'C'. Can you explain this answer?
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