Consumer surplus captures some of the value of a product thereby reducing the price a firm can charges for it.

Question

Quizplus · Accepted Answer

Consumer surplus refers to the difference between the maximum price a consumer is willing to pay for a product and the actual price they pay. This captures the additional value that the consumer derives from the product, which reduces the price a firm can charge for it. By offering a price that is lower than the maximum price that consumers are willing to pay, firms can capture a market share and increase their sales volume. Thus, consumer surplus plays a role in determining the price a firm can charge for its products.

Consumer Surplus Captures Some of the Value of a Product