Which of the following best defines the term 'consumer surplus' in microeconomics?

• A. The maximum price a seller can charge for a product
• B. The difference between what a consumer is willing to pay for a good and what they actually pay
• C. The quantity of goods purchased by consumers at a given price
• D. The total amount of money spent by consumers in a market

Answer: (B)

Verified step by step guidance

1. Understand that consumer surplus is a concept in microeconomics that measures the benefit or gain consumers receive when they pay less for a good than the maximum amount they are willing to pay.
2. Identify the key components of consumer surplus: the maximum price a consumer is willing to pay and the actual price they pay in the market.
3. Express consumer surplus mathematically as the difference between the willingness to pay (WTP) and the market price (P): \(\text{Consumer Surplus} = \text{WTP} - P\).
4. Recognize that consumer surplus is not about the quantity purchased or the total money spent, but rather the extra value or utility consumers get from paying less than their maximum willingness to pay.
5. Conclude that the best definition of consumer surplus is 'the difference between what a consumer is willing to pay for a good and what they actually pay.'