In the standard adjoining diagram, the measure of consumer surplus is
Consumer surplus is a measure in economics that reflects the difference between what consumers are willing to pay for a good or service versus what they actually do pay. It is essentially the area above the price level and below the demand curve.
Consider the diagram provided:
- The demand curve is typically represented by the line extending from point P downward.
- The consumer surplus is the area between the demand curve and the horizontal line representing the price level.
- Here, point A on the vertical axis represents the price level. The area AB between the price A, the demand curve at P, and the quantity axis at B is the consumer surplus.
- Therefore, the consumer surplus is the area AB in the given diagram.
Hence, the correct answer is option AB.
Important Questions from Consumer behaviour
In relation to theory of consumers behaviour, which of the following statements is INCORRECT?
The concept of consumer surplus was propounded by __________.
Goods whose demand varies inversely with income are called ____ goods.
_____ have an income elasticity of demand of between 0 and +1.
According to ____ theory, a consumer will continue to buy such products that will deliver him the most utility or maximum satisfaction at relative prices.
