Consumer surplus:
A) does not exist in equilibrium.
B) is illustrated by the area under the demand curve and above the market price.
C) is illustrated by the area under the demand curve and below the market price.
D) is illustrated by the area above the supply curve and under the demand curve.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a good and the actual market price they pay. It can be illustrated by the area under the demand curve and above the market price, as this represents the amount of value that consumers are receiving above and beyond what they paid for the good. Choice A is incorrect because consumer surplus does exist in equilibrium, as it represents the extra benefit that consumers receive from the transaction. Choice C is incorrect because this would represent a negative consumer surplus, which is not possible. Choice D is incorrect because this would be the total economic surplus, which includes both consumer and producer surplus.

Consumer Surplus