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Questions and Answers
What is consumer surplus?
What is consumer surplus?
A measure of the welfare that people gain from consuming goods.
Consumer surplus increases when prices decrease.
Consumer surplus increases when prices decrease.
True (A)
The area above the price line and below the demand curve represents _____ surplus.
The area above the price line and below the demand curve represents _____ surplus.
consumer
Which of the following factors leads to an increase in consumer surplus? (Select all that apply)
Which of the following factors leads to an increase in consumer surplus? (Select all that apply)
What relationship does the diagram between price, demand, and consumer surplus illustrate?
What relationship does the diagram between price, demand, and consumer surplus illustrate?
Why might businesses analyze consumer surplus?
Why might businesses analyze consumer surplus?
In the provided table, what is the consumer surplus when the price is set at Rs. 7?
In the provided table, what is the consumer surplus when the price is set at Rs. 7?
What is consumer surplus?
What is consumer surplus?
Consumer surplus decreases when prices decrease.
Consumer surplus decreases when prices decrease.
Which of the following factors can increase consumer surplus? (Select all that apply)
Which of the following factors can increase consumer surplus? (Select all that apply)
The area above the price line and below the demand curve represents __________.
The area above the price line and below the demand curve represents __________.
How does a decrease in price impact consumer surplus?
How does a decrease in price impact consumer surplus?
Match the following price points with their consumer surplus figures:
Match the following price points with their consumer surplus figures:
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Study Notes
Consumer Surplus
- Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay.
- It is represented by the area above the price line and below the demand curve.
- Consumer surplus increases when prices decrease.
- A decrease in price increases consumer surplus because consumers can purchase the good or service at a lower price than they were willing to pay.
Factors Increasing Consumer Surplus
- Lower prices.
- Increased consumer income.
- Improved product quality.
- Greater availability of substitutes.
Relationship Between Price, Demand, and Consumer Surplus
- The diagram illustrates the inverse relationship between price and quantity demanded. As price decreases, quantity demanded increases, leading to a larger consumer surplus.
Business Analysis of Consumer Surplus
- Businesses analyze consumer surplus to understand consumer willingness to pay and optimize pricing strategies to maximize profits.
Consumer Surplus Calculation Example
- A specific numerical example is needed to calculate consumer surplus at a given price (Rs. 7 in this case). The table mentioned is missing.
Incorrect Statements
- Consumer surplus does not decrease when prices decrease; it increases.
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