Asked by Yesenia Lazarte on May 04, 2024
Verified
Refer to Figure 4.6. Consumer surplus changes by the area [E - C] if price goes from equilibrium to
A) P1.
B) P3.
C) < P1.
D) > P3.
Consumer Surplus
The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit to consumers from market transactions.
Equilibrium
The market condition where supply equals demand for a product, resulting in a stable price.
- Analyze the changes in consumer and producer surplus due to shifts in market price.
Verified Answer
CC
Crystal ChristiansenMay 10, 2024
Final Answer :
A
Explanation :
Consumer surplus changes by the area [E - C] if the price goes from equilibrium to P1 because consumer surplus is the area between the demand curve and the price level, up to the quantity demanded. Moving from the equilibrium price to P1 would decrease consumer surplus by the area between these two prices, which is represented by [E - C].
Learning Objectives
- Analyze the changes in consumer and producer surplus due to shifts in market price.