Suppose a consumer's disposable income increases by 2000. How is their consumer surplus likely to be affected, assuming the price of the good remains unchanged and the good is a normal good?

• A. Consumer surplus will decrease only if the good is an inferior good.
• B. Consumer surplus will increase because the consumer can afford to buy more of the good.
• C. Consumer surplus will decrease because the price of the good remains unchanged.
• D. Consumer surplus will remain the same because income does not affect willingness to pay.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of consumer surplus. Consumer surplus is the difference between what a consumer is willing to pay for a good and what they actually pay. It measures the net benefit to the consumer from purchasing the good.
2. Step 2: Recognize that the price of the good remains unchanged, so the consumer surplus change depends on how the consumer's willingness and ability to buy the good changes with income.
3. Step 3: Since the good is a normal good, an increase in disposable income leads to an increase in the quantity demanded because the consumer can afford to buy more at the same price.
4. Step 4: With higher income and unchanged price, the consumer's willingness to pay for additional units increases, which typically raises the consumer surplus because the area under the demand curve above the price line expands.
5. Step 5: Conclude that consumer surplus will increase as the consumer benefits from being able to purchase more of the good at the same price, reflecting a higher net benefit.