Graph 7-2
-Refer to Graph 7-2.When the price rises from P₁ to P₂, consumer surplus:
A)increases by an amount equal to A
B)decreases by an amount equal to B + C
C)increases by an amount equal to B + C
D)decreases by an amount equal to C

Question

Graph 7-2 
-Refer to Graph 7-2.When the price rises from P₁ to P₂, consumer surplus:
A)increases by an amount equal to A 
B)decreases by an amount equal to B + C 
C)increases by an amount equal to B + C 
D)decreases by an amount equal to C

Quizplus · Accepted Answer

When the price rises from P₁ to P₂, the quantity demanded decreases from Q₁ to Q₂. The new consumer surplus is the area above the new demand curve and below the new price line, which is equal to area A. However, the consumer surplus before the price increase was the entire rectangle bounded by the original price line, demand curve, and the axes, which is equal to the sum of areas A, B, and C. When the price increases, the consumer surplus decreases by the sum of areas B and C, which is equal to (B + C). Therefore, the correct answer is option B.

Graph 7-2 -Refer to Graph 7-2.When the Price Rises from P₁ to from P₁