Figure 7-3

-Refer to Figure 7-3.When the price falls from P1 to P2,which area represents the increase in consumer surplus to existing buyers?
A) ABD
B) ACG
C) BCFD
D) DFG

Question

Figure 7-3
 
-Refer to Figure 7-3.When the price falls from P1 to P2,which area represents the increase in consumer surplus to existing buyers?
A) ABD 
B) ACG 
C) BCFD 
D) DFG

Quizplus · Accepted Answer

Area BCFD represents the increase in consumer surplus to existing buyers when the price falls from P1 to P2. Consumer surplus is the difference between the maximum price a consumer is willing to pay and the market price. As the price falls, the consumer surplus increases, and area BCFD represents that increase. Areas ABD and ACG represent the loss in producer surplus, and area DFG represents the deadweight loss due to the reduction in quantity demanded.

Figure 7-3 -Refer to Figure 7-3.When the Price Falls from P1 to Falls