The drought in the Midwest over the summer has decreased the supply of corn and, as a result, brought a sharp increase in the price of corn. (Source: The Economist, August 4, 2012) The increase in the price of corn
A) always increases consumer surplus.
B) always decreases consumer surplus.
C) does not affect consumer surplus because this change reflects only a movement along the demand curve.
D) increases consumer surplus if demand is elastic and decreases consumer surplus if demand is inelastic.

Question

Quizplus · Accepted Answer

An increase in the price of corn decreases consumer surplus because consumers have to pay more for the same quantity or buy less at the higher price, reducing the overall benefit they receive from consumption.

The Drought in the Midwest Over the Summer Has Decreased