Define consumer surplus. Using a graph, explain the change in consumer surplus that would result from a decrease in the price of a gasoline.

Refer to Figure 6.8.





What will be an ideal response?


Consumer surplus is the net benefit a consumer receives from participating in the market for a good. Graphically, it is represented by the area below the demand curve and above the price of the good. When the price of gasoline is P1, consumer surplus is represented by the area of the triangle labeled a in the graph. When the price of gasoline falls to P2, consumer surplus is equal to the area of triangle abc.

Economics

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