If the market for a good is in equilibrium at a price of $20, what is true about consumer...
Question:
If the market for a good is in equilibrium at a price of $20, what is true about consumer surplus?
Consumers enjoy surplus equal to $20 per unit on all units of the good consumed.
Consumer surplus is enjoyed on all units of the good including the marginal unit.
Consumer surplus is enjoyed on all units except the marginal unit.
If consumer surplus is positive, producer surplus must be negative.
Consumer Surplus:
Consumer surplus is the added benefit to the consumer from the purchase of a good or service. It is equal to the difference between what the consumer was willing to pay (as measured by the demand) and what they actually paid.
Answer and Explanation: 1
If the market for a good is in equilibrium at a price of $20, what is true about consumer surplus?
Consumers enjoy surplus equal to $20 per unit on all units of the good consumed. No. The consumer surplus is equal to the area below demand and above the price ($20).
Consumer surplus is enjoyed on all units of the good including the marginal unit. No. Consumer surplus is enjoyed as long as the demand curve is above the price. Because the market is in equilibrium, however, the last unit sold will be at the point where the price equals the demand, so no surplus is enjoyed at that unit.
Consumer surplus is enjoyed on all units except the marginal unit. Yes. See above.
If consumer surplus is positive, producer surplus must be negative. No. The producer surplus is equal to the area between the price and supply. Because the market is in equilibrium, producer surplus will be positive.
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Consumer Surplus: Definition, Formula & Examples
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Chapter 7 / Lesson 6
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Learn the consumer surplus definition and see how it is determined by the people purchasing the product. Study consumer surplus examples using its formula.
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