When the market price of a good falls, consumer surplus increases because (1) the consumer surplus received by existing buyers becomes larger and (2) more buyers enter the market at the lower price.

Question

Quizplus · Accepted Answer

When the market price of a good falls, existing buyers can purchase the same amount of the good for a lower price, increasing their consumer surplus. Additionally, the lower price may attract new buyers to the market, increasing the overall quantity demanded and resulting in a larger consumer surplus for these new buyers. Both effects contribute to an overall increase in consumer surplus.

When the Market Price of a Good Falls, Consumer Surplus