The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer.This is because the consumer captures some of that value in the form of what economists call a _____.

Question

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Consumer surplus is the difference between the value a consumer places on a good or service (the willingness to pay) and the price the consumer actually pays. This is often depicted graphically as the area under the demand curve and above the price line. The consumer surplus represents the economic welfare that consumers receive from consuming a good or service above and beyond the price they pay.

The Price a Firm Charges for a Good or Service