Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases the equilibrium price.
B
It increases the equilibrium price.
C
It has no effect on equilibrium quantity.
D
It shifts the demand curve to the right.
Understanding the Answer
Let's break down why this is correct
Answer
An increase in consumer surplus happens when consumers are able to buy goods at lower prices than they are willing to pay, which means they gain extra value from their purchases. In a competitive market, this increase usually happens when prices drop due to higher supply or lower demand. As consumer surplus rises, consumers feel happier and may buy more, which can lead to an increase in overall demand for products. This change in demand can push the market towards a new equilibrium, where the price and quantity of goods adjust to balance what consumers want and what producers are willing to supply. For example, if a new technology makes a product cheaper, more people will buy it, increasing consumer surplus and eventually leading to a new price point in the market.
Detailed Explanation
When consumer surplus increases, it means more people want to buy at the current price. Other options are incorrect because Some might think that more consumer surplus means prices go down; It's a common mistake to think that more consumer surplus directly raises prices.
Key Concepts
consumer surplus
market equilibrium
Topic
Understanding Marginal Analysis
Difficulty
medium level question
Cognitive Level
understand
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