What is the difference between approximate and exact consumer surplus?
A) Approximate consumer surplus is calculated using an uncompensated demand curve, while exact consumer surplus is calculated using a compensated demand curve.
B) Approximate consumer surplus is calculated using a compensated demand curve, while exact consumer surplus is calculated using an uncompensated demand curve.
C) There is no difference between approximate and exact consumer surplus.
D) Approximate consumer surplus can be measured, while exact consumer surplus cannot be measured.

Question

Quizplus · Accepted Answer

Approximate consumer surplus is calculated using an uncompensated demand curve, which does not take into account any change in consumer behavior when the price of a good changes. On the other hand, exact consumer surplus is calculated using a compensated demand curve, which does take into account any change in consumer behavior when the price of a good changes (i.e., it compensates for any loss in consumer utility resulting from a price increase). Therefore, option A is the correct choice.

What Is the Difference Between Approximate and Exact Consumer Surplus