Overview
Consumer surplus is a vital concept in economics that measures the benefit consumers receive when they pay less for a product than what they are willing to pay. It reflects consumer welfare and market efficiency, providing insights into how well a market is functioning. Understanding consumer surplu...
Key Terms
Example: If a consumer is willing to pay $10 for a book but buys it for $7, the consumer surplus is $3.
Example: The first slice of pizza may provide high satisfaction, but the fifth slice may provide much less.
Example: A downward-sloping demand curve indicates that as price decreases, quantity demanded increases.
Example: At a price of $5, 100 units of a product are sold, achieving market equilibrium.
Example: Analyzing how tax changes impact consumer surplus and overall welfare.
Example: If a 10% price increase leads to a 20% drop in quantity demanded, the price elasticity is -2.