An increase in expected future income will most likely:

• A. Reduce consumer surplus for all consumers.
• B. Decrease a consumer's willingness to pay for goods and services.
• C. Increase a consumer's willingness to pay for goods and services.
• D. Have no effect on a consumer's willingness to pay for goods and services.

Answer: (C)

Verified step by step guidance

1. Understand the concept of expected future income: It refers to the income consumers anticipate earning in the future, which can influence their current spending behavior.
2. Recall the relationship between income and demand: Generally, when consumers expect higher future income, their current demand for normal goods tends to increase because they feel more financially secure.
3. Analyze willingness to pay: Willingness to pay is the maximum amount a consumer is ready to spend on a good or service. If expected future income rises, consumers are likely to be willing to pay more now, anticipating they can afford it.
4. Consider consumer surplus: Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. An increase in willingness to pay does not necessarily reduce consumer surplus; it may increase demand and prices, but consumer surplus depends on the price paid relative to willingness to pay.
5. Conclude the effect: Since an increase in expected future income raises consumers' willingness to pay for goods and services, the correct interpretation is that it increases willingness to pay rather than reducing it or having no effect.