Which concept best explains the difference between what consumers are willing to pay for a health product and the actual price they pay?

• A. Producer surplus
• B. Consumer surplus
• C. Price elasticity of demand
• D. Marginal cost

Answer: (B)

Verified step by step guidance

1. Understand the concept of 'consumer surplus': it represents the difference between the maximum amount a consumer is willing to pay for a good or service and the actual price they pay.
2. Recognize that 'producer surplus' refers to the difference between the price producers receive and the minimum price they are willing to accept, so it does not explain the consumer's perspective.
3. Recall that 'price elasticity of demand' measures how quantity demanded responds to price changes, which is related to responsiveness but not directly about the difference between willingness to pay and price.
4. Note that 'marginal cost' is the cost of producing one additional unit of a good, which relates to production decisions rather than consumer willingness to pay.
5. Conclude that the concept best explaining the difference between what consumers are willing to pay and the actual price paid is 'consumer surplus'.