Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumer surplus decreases significantly
B
Consumer surplus increases significantly
C
Consumer surplus remains unchanged
D
Consumer surplus increases slightly
Understanding the Answer
Let's break down why this is correct
Answer
When the price of a product decreases and the demand for that product is elastic, consumer surplus increases significantly. Elastic demand means that consumers are very responsive to price changes; when prices drop, they buy much more of the product. For example, if a popular video game goes from $60 to $30, many more people will decide to buy it because it is now more affordable. This increase in purchases leads to a larger area of consumer surplus, which is the difference between what consumers are willing to pay and what they actually pay. Therefore, a decrease in price not only encourages more purchases but also increases the overall benefit that consumers receive from buying the product.
Detailed Explanation
When the price goes down and demand is elastic, more people want to buy the product. Other options are incorrect because Some might think that a lower price means less benefit; It's a common mistake to think that price changes don't affect consumer surplus.
Key Concepts
price elasticity of demand
consumer surplus
Topic
Consumer Spending and Price Elasticity
Difficulty
medium level question
Cognitive Level
understand
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