Consumer Surplus Examples: Applying Microeconomic Theory

📚 Quick Study Guide

• 💰 Consumer surplus is the difference between what a consumer is willing to pay for a good or service and what they actually pay.
• 📈 It's graphically represented as the area below the demand curve and above the market price.
• ✏️ Formula: Consumer Surplus = Willingness to Pay - Actual Price
• 🛒 Higher consumer surplus generally indicates greater consumer welfare.
• 🌍 Market equilibrium affects consumer surplus; shifts in supply or demand can change it.

🤔 Practice Quiz

1. What does consumer surplus represent?
   1. The cost of production for a good.
   2. The benefit consumers receive from paying less than they were willing to pay.
   3. The revenue earned by producers.
   4. The equilibrium price in a market.
2. If a consumer is willing to pay $20 for a product but buys it for $15, what is their consumer surplus?
   1. $5
   2. $15
   3. $20
   4. $35
3. Which of the following increases consumer surplus, all other things being equal?
   1. An increase in the price of the good.
   2. A decrease in the price of the good.
   3. A decrease in demand.
   4. An increase in supply.
4. Consumer surplus is graphically represented by:
   1. The area above the supply curve and below the market price.
   2. The area below the demand curve and above the market price.
   3. The area between the supply and demand curves.
   4. The area above the demand curve and below the market price.
5. What happens to consumer surplus if the government imposes a price floor above the equilibrium price?
   1. It increases.
   2. It decreases.
   3. It remains the same.
   4. It becomes zero.
6. Suppose a new technology lowers the cost of producing smartphones. What is the likely impact on consumer surplus for smartphones?
   1. It decreases because prices will rise.
   2. It increases because prices will fall.
   3. It remains the same because technology doesn't affect consumers.
   4. It is unpredictable without more information.
7. Which of the following is an example of consumer surplus?
   1. A store selling a product for more than it cost to produce.
   2. A consumer buying a car at the sticker price.
   3. A person finding a rare book at a garage sale for much less than its market value.
   4. A company maximizing its profits.