Question

For a freely provided public good, a consumer's willingness to pay for a small increase in the good or willingness to accept payment for a small decrease in the good will provide approximately the same value for the change in consumer surplus.

Identify is the statement is true and explain why.

Answer 1

There is consumer surplus when the price paid by the consumers are less than their willingness to pay. It is a measurement of consumer benefit for the economy.it is a measure for extra benefits received by the consumers when they are paying low for anything then they are willing willing to. Consumer surplus is basically pillared on the marginal utility theory.the utility of a good or a service differ from person to person based on their preference of the individual. Consumer surplus increase with the decrease in the price of the good and decreases with the price increases. Consumer surplus includes a benefit for a better feeling of gaining a better benefit. The value derived for purchase of a good referred to as consumer surplus.if demand is a sure to be same arising price lead to fall in consumer surplus while a fall in price lead to rise in the consumer surplus. The derivation of the demands for form a marginal utility. If price is less than marginal utility then there is consumer surplus.