Economics Consumer Surplus And Producer Surplus Questions Medium
The relationship between consumer surplus and price can be described as follows:
Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay. It represents the additional benefit or value that consumers receive from purchasing a good or service at a price lower than what they are willing to pay.
As the price of a good or service decreases, consumer surplus increases. This is because consumers are able to purchase the good or service at a lower price than what they are willing to pay, resulting in a larger difference between the maximum price they are willing to pay and the actual price they pay.
On the other hand, as the price of a good or service increases, consumer surplus decreases. This is because consumers are required to pay a higher price, reducing the difference between the maximum price they are willing to pay and the actual price they pay.
In summary, consumer surplus and price have an inverse relationship. As the price decreases, consumer surplus increases, and as the price increases, consumer surplus decreases.