Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It indicates a decrease in total welfare.
B
It suggests that consumers are paying higher prices.
C
It reflects an increase in the overall welfare of consumers.
D
It has no effect on market efficiency.
Understanding the Answer
Let's break down why this is correct
Answer
In welfare economics, consumer surplus is an important concept that shows how much extra benefit consumers receive when they pay less for a good than what they are willing to pay. When consumer surplus increases, it means that consumers are getting more value from their purchases, which indicates that they are happier and better off. This can happen if prices fall or if consumers' preferences change in a way that they value the product more. For example, if a new smartphone is priced lower than expected, more people can afford it, leading to a larger consumer surplus. Overall, an increase in consumer surplus suggests that the market is functioning well and contributing positively to the overall welfare of society.
Detailed Explanation
When consumer surplus increases, it means consumers are getting more value for their money. Other options are incorrect because Some might think that more consumer surplus means less total welfare, but that's not true; This option suggests that higher prices lead to more consumer surplus, but that's incorrect.
Key Concepts
market equilibrium
welfare economics
Topic
Consumer Surplus and Marginal Analysis
Difficulty
medium level question
Cognitive Level
understand
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