Which of the following best describes consumer surplus in the context of willingness to pay for a means of transport?

• A. The total amount paid by all consumers for the transport
• B. The cost of producing the transport service
• C. The maximum price charged by the transport provider
• D. The difference between what a consumer is willing to pay and what they actually pay for the transport

Answer: (D)

Verified step by step guidance

1. Understand the concept of consumer surplus: it represents the difference between the maximum amount a consumer is willing to pay for a good or service and the actual price they pay.
2. Identify the consumer's willingness to pay (WTP), which is the highest price a consumer values the good or service at before deciding to purchase.
3. Recognize the actual price paid by the consumer, which is the market price or the price set by the provider.
4. Calculate consumer surplus using the formula: \(\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Price Paid}\).
5. Interpret consumer surplus as a measure of the benefit or gain consumers receive when they pay less than what they were willing to pay.