📚 Learning Guide
Consumer Surplus and Marginal Analysis
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If a consumer experiences an increase in consumer surplus when they purchase a product, what is the underlying cause of this change?

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Choose the Best Answer

A

The price of the product decreased below the consumer's maximum willingness to pay.

B

The consumer's income increased significantly.

C

The consumer's demand for the product has become more elastic.

D

The consumer has decided to purchase fewer units of the product.

Understanding the Answer

Let's break down why this is correct

Answer

Consumer surplus is the benefit that consumers get when they pay less for a product than what they are willing to pay. When a consumer experiences an increase in consumer surplus, it usually happens because the price of the product has decreased or because they perceive the value of the product to be higher than the price they pay. For example, if someone is willing to pay $50 for a pair of shoes but finds them on sale for $30, their consumer surplus increases to $20. This change means they feel happier with their purchase because they saved money and got more value than expected. Overall, the increase in consumer surplus reflects a better deal for the consumer, making them feel satisfied with their purchase.

Detailed Explanation

When the price drops below what a consumer is willing to pay, they save money. Other options are incorrect because Some might think that having more money means more surplus; People may believe that changing demand affects surplus directly.

Key Concepts

Consumer Surplus
Marginal Analysis
Elasticity of Demand
Topic

Consumer Surplus and Marginal Analysis

Difficulty

medium level question

Cognitive Level

understand

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