Economics Consumer Surplus And Producer Surplus Questions Medium
The impact of a change in price on consumer surplus depends on whether the price increases or decreases.
If the price increases, consumer surplus will decrease. This is because consumers are willing to pay less for a product than the new higher price, resulting in a smaller area between the demand curve and the new price. As a result, some consumers may choose not to purchase the product at the higher price, reducing their overall surplus.
On the other hand, if the price decreases, consumer surplus will increase. This is because consumers are now able to purchase the product at a lower price than what they were originally willing to pay. The area between the demand curve and the new lower price expands, allowing consumers to gain more surplus.
In summary, an increase in price leads to a decrease in consumer surplus, while a decrease in price leads to an increase in consumer surplus.