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

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the price a consumer is willing to pay for a good or service and the actual price they pay. This surplus represents the value that the consumer receives from the product. If a firm tries to charge a price that is too high, consumers will not be willing to pay for the product and the firm will lose out on the consumer surplus. Therefore, the existence of consumer surplus often limits the price that a firm can charge and reduces its potential revenue.

Consumer Surplus Captures Some of the Value of a Product