Multiple Choice
Which of the following occurs simultaneously with an income effect when the price of a good changes?
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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 advantage for a house buyer in terms of consumer surplus?
A
Purchasing a house for less than their maximum willingness to pay
B
Having no difference between the market price and their willingness to pay
C
Purchasing a house at a price higher than their willingness to pay
D
Paying exactly their maximum willingness to pay for a house
Verified step by step guidance1
Understand the concept of consumer surplus: it is the difference between the maximum amount a consumer is willing to pay for a good and the actual price they pay.
Identify the consumer's maximum willingness to pay for the house, which represents the highest price they value the house at.
Compare the market price of the house to the consumer's maximum willingness to pay.
Recognize that consumer surplus occurs when the market price is less than the maximum willingness to pay, meaning the buyer gains extra benefit or value.
Conclude that purchasing a house for less than their maximum willingness to pay best describes an advantage in terms of consumer surplus.
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