3. Explain the concept of Consumer's surplus with a diagram (2.7 Consumer's Surplus) short answer
Answers
Answer
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Explanation
Consumer surplus -- a basic concept in microeconomics – is the difference between the total amount that consumers of a product would have been willing to pay for some good or service, and the amount they actually paid at the market price. Visualize a typical downward-sloping market demand curve – let’s say for apples. That market demand curve is the (horizontal) sum of the individual demand curves of all consumers in the market. Each point on one of those individual demand curves represents the amount of apples that consumer is willing and able to buy at a given price. The same applies to the market demand curve – it’s as though you had sorted all the potential apple buyers from left to right according to the maximum amount each would be willing to pay for an apple. Some are not willing to pay the market price, and those potential buyers do not actually buy any apples.
