What is consumer surplus and how does it affect consumer preferences?

Expert Solution

Consumer surplus is the difference between what a consumer is willing to pay for a good and what they do pay. It is the difference between what a consumer is willing to pay for a good and what they do pay.

Consumer surplus, also known as economic surplus, refers to the amount by which the price of goods or services exceeds their marginal cost. Consumer surplus can be calculated by subtracting the total cost of an item from its price and then dividing that number by its price.

The concept of consumer surplus can be illustrated with an example: A person goes to the store and sees that there are two identical laptops, one priced at $500 and one at $300. The person decides to purchase the cheaper laptop because it has a higher consumer surplus than the more expensive laptop. The consumer surplus can be calculated using the following formula:

Consumer surplus = (price consumers are willing to pay) - (actual price paid)

Consumer surplus is the difference between what a consumer is willing to pay for a good and what they do pay.

frankdube answered 2 years ago

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