Briefly explain and provide an example of how marginal willingness to pay relates to consumer surplus

Question

What will be an ideal response?

Answer 1

Student responses will vary, but should accurately explain and provide a relevant example of how marginal willingness to pay relates to consumer surplus. A sample response follows. If the consumer is a buyer of several units of a good, the earlier units will have greater marginal value and therefore create more consumer surplus because marginal willingness to pay falls as greater quantities are consumed in any period. For example, if you are very thirsty, you would be willing to pay a great deal more than market price for a glass of lemonade, and you would get a great deal of consumer surplus from the first glass. But after drinking several glasses, you would no longer be thirsty and would not be willing to pay much if anything for an additional glass, so you would receive little or no consumer surplus from buying one