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 the term for the difference between the consumer's evaluation of a product and the price which is paid for it?
A)Price discrimination.
B)Price elasticity of demand.
C)Consumer indifference.
D)Consumer surplus.

Question

Quizplus · Accepted Answer

The term for the difference between the consumer's evaluation of a product and the price which is paid for it is known as consumer surplus. In this case, Irina is prepared to pay a maximum of $2.40 for her first glass of cranberry juice, but if she pays less for subsequent glasses, she will gain consumer surplus. For example, if Irina pays $2.20 for her second glass of cranberry juice, her consumer surplus will be 20 cents.

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