Suppose that Irina is prepared to pay a maximum of $2.40 for her first glass of cranberry juice,but for each subsequent glass she is only prepared to pay 20 cents less than the previous one.
-Which of the following statements is correct regarding demand and consumer surplus?
A)The greater the elasticity of demand,the greater will be the consumer surplus.
B)The greater the elasticity of demand,the smaller will be the consumer surplus.
C)The greater the number of substitutes for a product,the greater will be the consumer surplus.
D)The smaller the elasticity of demand,the smaller will be the consumer surplus.

Question

Quizplus · Accepted Answer

The greater the elasticity of demand, the smaller will be the consumer surplus because consumers are more sensitive to price changes and less willing to pay above the market price.

Suppose That Irina Is Prepared to Pay a Maximum of $2.40