CA Foundation Exam > CA Foundation Questions > Consumer surplus means ———&...
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Consumer surplus means ———— .
- a)the area inside the budget line
- b)the area between the average revenue and marginal revenue curves
- c)the difference 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
Consumer surplus means ———— .a)the area inside...
Consumer Surplus
Consumer surplus refers to the difference between the maximum amount that a consumer 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 value that a consumer receives from purchasing a good or service at a price lower than their maximum willingness to pay.
Formula for Consumer Surplus
The formula for consumer surplus is as follows:
Consumer Surplus = Maximum Willingness to Pay – Market Price
For example, if a consumer is willing to pay $50 for a product but only has to pay $30 in the market, their consumer surplus is $20.
Graphical Representation
Consumer surplus can be represented graphically as the area below the demand curve and above the market price. This is because the demand curve represents the maximum amount that consumers are willing to pay for a product at each quantity, and the market price is the actual price that they pay.
Factors Affecting Consumer Surplus
There are several factors that can affect consumer surplus, including:
1. Changes in consumer preferences and tastes
2. Changes in income levels
3. Changes in the prices of complementary and substitute goods
4. Changes in the availability of goods and services
5. Changes in government policies and regulations
Conclusion
Consumer surplus is an important concept in economics that helps to measure the welfare or benefit that consumers receive from the consumption of goods and services. By understanding consumer surplus, businesses and policymakers can make informed decisions about pricing, production, and regulation that can improve the overall welfare of consumers.
Consumer surplus refers to the difference between the maximum amount that a consumer 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 value that a consumer receives from purchasing a good or service at a price lower than their maximum willingness to pay.
Formula for Consumer Surplus
The formula for consumer surplus is as follows:
Consumer Surplus = Maximum Willingness to Pay – Market Price
For example, if a consumer is willing to pay $50 for a product but only has to pay $30 in the market, their consumer surplus is $20.
Graphical Representation
Consumer surplus can be represented graphically as the area below the demand curve and above the market price. This is because the demand curve represents the maximum amount that consumers are willing to pay for a product at each quantity, and the market price is the actual price that they pay.
Factors Affecting Consumer Surplus
There are several factors that can affect consumer surplus, including:
1. Changes in consumer preferences and tastes
2. Changes in income levels
3. Changes in the prices of complementary and substitute goods
4. Changes in the availability of goods and services
5. Changes in government policies and regulations
Conclusion
Consumer surplus is an important concept in economics that helps to measure the welfare or benefit that consumers receive from the consumption of goods and services. By understanding consumer surplus, businesses and policymakers can make informed decisions about pricing, production, and regulation that can improve the overall welfare of consumers.
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Consumer surplus means ———— .a)the area inside...
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). Therefore option C is a correct answer
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Consumer surplus means ———— .a)the area inside the budget lineb)the area between the average revenue and marginal revenue curvesc)the difference between the maximum amount a person is willing to pay for a good and its market priced)none of the aboveCorrect answer is option 'C'. Can you explain this answer?
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