When demand and supply are linear, consumer surplus is equal to:
A) the area between the demand curve and the price, out to the quantity that is exchanged.
B) the area between the supply curve and the price, out to the quantity that is exchanged.
C) the entire area between the demand curve and the price. See Section 3.1.
D) the entire area between the supply curve and the price.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay and what they actually pay for a product. When demand and supply are linear, consumer surplus is equal to the area between the demand curve and the price, out to the quantity that is exchanged. This is because the demand curve represents the maximum price consumers are willing to pay, and the price represents what they actually pay. The area between the demand curve and the price up to the quantity that is exchanged reflects the difference between what consumers are willing to pay and what they actually pay, which is their surplus.

When Demand and Supply Are Linear, Consumer Surplus Is Equal