Which of the following best describes consumer surplus in the context of willingness to pay?

• A. The maximum price a seller is willing to accept for a good
• B. The price at which a good is sold in the market
• C. The total amount a consumer spends on a good
• D. The difference between what a consumer is willing to pay and what they actually pay

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of willingness to pay (WTP), which is the maximum amount a consumer is willing to pay for a good or service.
2. Step 2: Recognize that consumer surplus measures the benefit a consumer receives when they pay less than their maximum willingness to pay.
3. Step 3: Express consumer surplus mathematically as the difference between willingness to pay and the actual market price paid: \(\text{Consumer Surplus} = \text{WTP} - \text{Price}\).
4. Step 4: Note that consumer surplus is not the total amount spent, nor the price sellers accept, but specifically the extra value or 'surplus' consumers gain from paying less than their maximum willingness to pay.
5. Step 5: Conclude that the best description of consumer surplus is the difference between what a consumer is willing to pay and what they actually pay.