Asked by imane sahbani on Apr 25, 2024
Verified
Refer to Figure 4.6. Consumer surplus is area [A + B + E] if price is
A) P1.
B) P2.
C) P3.
D) above P3.
Consumer Surplus
The difference between the total amount consumers are willing and able to pay for a good or service and the total amount they actually pay.
Equilibrium
A state in which market supply and demand balance each other, and as a result, prices become stable.
Market
A venue or mechanism where buyers and sellers come together to exchange goods, services, or information.
- Establish the point of equilibrium in a market by scrutinizing supply and demand curves, and measure the surplus enjoyed by consumers and producers at equilibrium.
- Grasp the association among market price, individual payment capacity, and excess consumer value.
Verified Answer
ME
Midnight EditingApr 29, 2024
Final Answer :
A
Explanation :
Consumer surplus is the area between the demand curve and the price level, up to the quantity demanded. At price P1, which is lower than P2 and P3, the consumer surplus is maximized, encompassing areas A, B, and E.
Learning Objectives
- Establish the point of equilibrium in a market by scrutinizing supply and demand curves, and measure the surplus enjoyed by consumers and producers at equilibrium.
- Grasp the association among market price, individual payment capacity, and excess consumer value.