The value that consumers get (from consuming a product) over and above what they actually paid for the product is called
consumer
utility.
consumption
expenditures.
consumer
surplus.
consumerdem
The correct answer and explanation is :
The correct answer is: consumer surplus.
Explanation:
Consumer surplus is the difference between the maximum price a consumer is willing to pay for a product and the actual price they pay. It represents the extra benefit or value that consumers receive when they purchase a good or service at a lower price than they were originally willing to pay.
Understanding Consumer Surplus
Every consumer has a certain willingness to pay for a product, which is based on their perception of the product’s value. However, in a competitive market, products are usually sold at a lower price than the maximum amount a consumer is willing to pay. This creates a “surplus” or extra value that the consumer gains.
For example:
- Suppose a consumer is willing to pay $100 for a new pair of shoes.
- The actual market price of the shoes is $70.
- The consumer surplus in this case is $100 – $70 = $30.
This means that the consumer receives an extra benefit of $30 because they were willing to pay more but got the product for a lower price.
Importance of Consumer Surplus
- Measures Consumer Welfare: Consumer surplus helps in understanding how much benefit consumers are getting from market transactions.
- Economic Efficiency: In an efficient market, consumer surplus is maximized because goods are sold at a price that benefits both consumers and producers.
- Policy Decisions: Governments and policymakers use consumer surplus to analyze the effects of taxation, subsidies, and price controls on consumers.
Graphical Representation
Consumer surplus is often shown on a demand and supply graph as the area between the demand curve and the market price, above the equilibrium price level.
In conclusion, consumer surplus is a key concept in economics that explains the extra value consumers receive when they purchase goods and services at prices lower than their willingness to pay.