A measure of consumer surplus determined by the area under the compensated demand curve is known as the
A) approximate measure of consumer surplus
B) exact measure of consumer surplus
C) inelastic measure of consumer surplus

Question

Quizplus · Accepted Answer

The area under the compensated demand curve represents the maximum amount that consumers would be willing to pay for a good or service, which is equivalent to their total consumer surplus. This measure is considered exact because it takes into account changes in income and the substitution effect, providing a more accurate representation of the value consumers place on a product.

A Measure of Consumer Surplus Determined by the Area Under