Which of the following correctly defines consumer surplus for a product?

• A. The difference between what a consumer is willing to pay for a product and what the consumer actually pays.
• B. The maximum price a seller is willing to accept for a product.
• C. The difference between the market price and the cost of production for a product.
• D. The total amount paid by all consumers for a product.

Answer: (A)

Verified step by step guidance

1. Understand the concept of consumer surplus: it measures the benefit or gain a consumer receives when they pay less for a product than the maximum amount they are willing to pay.
2. Identify the maximum willingness to pay (WTP) as the highest price a consumer is ready to pay for a product based on their preferences and utility.
3. Recognize the actual price paid by the consumer, which is typically the market price of the product.
4. Calculate consumer surplus as the difference between the consumer's willingness to pay and the actual price paid, expressed as: \[\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Price Paid}\]
5. Compare this definition with the other options to confirm that consumer surplus specifically relates to the consumer's gain, not the seller's cost, market price, or total payments.