Suppose that Irina is prepared to pay a maximum of $2.40 for her first glass of cranberry juice,but for each subsequent glass she is only prepared to pay 20 cents less than the previous one.
-What is meant by the term consumer surplus?
A)It is the difference between the actual price of a product and its real value.
B)It is the surplus which consumers receive from a product as a result of a drop in its price.
C)It is the difference between what the consumer is willing to pay and the actual price of the product.
D)It is the difference between the price which consumers pay for a product and the actual costs of production.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between what the consumer is willing to pay (in this case, the maximum price Irina is prepared to pay) and the actual price of the product. In this scenario, if Irina ends up paying less than $2.40 for her first glass of cranberry juice (or for subsequent glasses), then she will have gained consumer surplus.

Suppose That Irina Is Prepared to Pay a Maximum of $2.40