Multiple Choice
In the context of consumer surplus and willingness to pay, which price range would maximize consumer surplus if a consumer's willingness to pay for a good is 95 and the market price falls within the following ranges?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Which of the following best describes an inferior good in the context of consumer surplus and willingness to pay?
A
A good for which demand increases as consumer income increases
B
A good for which demand decreases as consumer income increases
C
A good for which consumer surplus is always zero
D
A good that is always more expensive than normal goods
Verified step by step guidance1
Understand the definition of an inferior good: it is a type of good for which demand decreases as consumer income increases.
Recall that consumer surplus is the difference between what consumers are willing to pay and what they actually pay, but this concept does not directly define an inferior good.
Recognize that an increase in consumer income typically leads to a decrease in demand for inferior goods, unlike normal goods where demand increases with income.
Eliminate options that contradict the definition: a good for which demand increases as income increases is a normal good, not an inferior good.
Conclude that the best description of an inferior good is 'a good for which demand decreases as consumer income increases.'
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