In the context of consumer surplus and willingness to pay, what does consumer surplus represent for an individual buyer in a market?

• A. The cost of producing the good for the seller
• B. The difference between what a buyer is willing to pay for a good and what the buyer actually pays
• C. The market equilibrium price
• D. The total amount paid by all buyers in the market

Answer: (B)

Verified step by step guidance

1. Understand the concept of willingness to pay (WTP), which is the maximum amount an individual buyer is ready to pay for a good or service.
2. Recognize that the actual price paid by the buyer in the market is usually less than or equal to their willingness to pay.
3. Define consumer surplus as the difference between the buyer's willingness to pay and the actual price paid: \(\text{Consumer Surplus} = \text{WTP} - \text{Price Paid}\).
4. Interpret consumer surplus as the net benefit or gain the buyer receives because they pay less than what they were willing to pay.
5. Note that consumer surplus is a measure of individual buyer's economic welfare, not related to production costs or total market payments.