The figure above shows the markets for water and diamonds.
-Based on the figures above,it is the case that the consumer surplus from water ________ the consumer surplus from diamonds and the marginal utility from water ________ the marginal utility from diamonds.
A) is equal to; is equal to
B) is larger than; is equal to
C) is larger than; is larger than
D) is larger than; is smaller than
E) is smaller than; is smaller than

Question

The figure above shows the markets for water and diamonds.
-Based on the figures above,it is the case that the consumer surplus from water ________ the consumer surplus from diamonds and the marginal utility from water ________ the marginal utility from diamonds.
A) is equal to; is equal to 
B) is larger than; is equal to 
C) is larger than; is larger than 
D) is larger than; is smaller than 
E) is smaller than; is smaller than

Quizplus · Accepted Answer

Consumer surplus is determined by the area under the demand curve but above the price line, which is typically larger for goods that are necessities (like water) compared to luxury goods (like diamonds), due to their respective demand elasticities. Marginal utility, however, decreases more rapidly for goods that are abundantly consumed (like water) compared to those that are consumed in smaller quantities (like diamonds), making the marginal utility from water smaller than that from diamonds.

The Figure Above Shows the Markets for Water and Diamonds