Which graphical tool is commonly used to illustrate the distribution of retailers along a price continuum in relation to consumer surplus and willingness to pay?

• A. A supply curve
• B. A production possibilities frontier
• C. A demand curve
• D. A Lorenz curve

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the purpose of the graphical tool in question. The problem asks for a tool that shows the distribution of retailers along a price continuum and relates this to consumer surplus and willingness to pay.
2. Step 2: Recall the definitions of the options: A supply curve shows the relationship between price and quantity supplied; a production possibilities frontier illustrates trade-offs in production; a Lorenz curve represents income or wealth distribution; a demand curve shows the relationship between price and quantity demanded, reflecting consumers' willingness to pay.
3. Step 3: Recognize that consumer surplus is the difference between what consumers are willing to pay and what they actually pay, which is graphically represented by the area under the demand curve and above the market price.
4. Step 4: Since the demand curve directly relates price to quantity demanded and reflects consumers' willingness to pay, it is the appropriate tool to illustrate the distribution of retailers along a price continuum in relation to consumer surplus.
5. Step 5: Conclude that the demand curve is the correct graphical tool for this purpose, as it effectively captures the concepts of willingness to pay and consumer surplus.