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Question

In the standard adjoining diagram, the measure of consumer surplus is

                                                              
 

The correct answer is
AB

The concept of consumer surplus is integral to understanding consumer behavior in economics. It represents the difference between what consumers are willing to pay for a good or service and what they actually pay. Graphically, consumer surplus is the area between the demand curve and the price level, up to the quantity consumed.

In the given diagram, let us analyze and identify the area representing consumer surplus:

  1. The demand curve is typically downward sloping, as shown by the line extending from point P.
  2. Consumer surplus is the area above the price line (which is parallel to the x-axis) and below the demand curve.
  3. In the diagram, the price level consumers pay is represented by line AB.
  4. The maximum price consumers are willing to pay is at point P, above A, where the demand curve starts.
  5. Thus, the consumer surplus is the triangular area formed by points A, B, and the point P on the demand curve above A.

This area is correctly marked as AB in the diagram provided. Therefore, the measure of consumer surplus in this standard diagram is the area AB.

Conclusion: The correct answer is \(AB\), as it represents the area of consumer surplus in the provided economic graph.

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Important Questions from Microeconomics

  1. Surge pricing takes place when a service provider

  2. What effect will a decrease in demand and an increase in supply have on equilibrium price?

  3. A situation where the expenditure of the government exceeds its revenue is called ______.

  4. Which of the following statements is NOT correct about the factors that gave rise to the Consumer Movement in India?

  5. The total value of goods and services traded is considered to be the _________ of trade.

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