Multiple Choice
Which classification best describes a good for which buyers are willing to pay more than the market price, resulting in a positive consumer surplus?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area:
A
below the supply curve and above the equilibrium price
B
between the demand curve and the equilibrium price, up to the quantity sold
C
above the demand curve and below the equilibrium price
D
between the supply curve and the equilibrium price, up to the quantity sold
Verified step by step guidance1
Recall the definition of consumer surplus: it is the difference between what consumers are willing to pay for a good (represented by the demand curve) and what they actually pay (the market price).
Identify the equilibrium price and quantity on the graph where the demand and supply curves intersect.
Understand that consumer surplus is the area between the demand curve and the equilibrium price line, extending from zero to the equilibrium quantity.
Visualize this area as a triangle or shape bounded above by the demand curve, below by the horizontal line at the equilibrium price, and vertically by the quantity sold.
Confirm that this area represents the total benefit consumers receive over and above the amount they pay at equilibrium.
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