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Question : Statement 1: The concept of consumer surplus measures the difference between the consumer's total expenditure and the maximum amount they are willing to pay.

Statement 2: Consumer surplus can be represented graphically as the area below the demand curve and above the market price.

Option 1: Statement 1 is true, and statement 2 is false.

Option 2: Statement 1 is false, and statement 2 is true.

Option 3: Both statement 1 and statement 2 are true.

Option 4: Both statement 1 and statement 2 are false.


Team Careers360 19th Jan, 2024
Answer (1)
Team Careers360 21st Jan, 2024

Correct Answer: Both statement 1 and statement 2 are true.


Solution : The correct option is (c) Option C: Both statement 1 and statement 2 are true.

Statement 1 is true. Consumer surplus represents the additional benefit or satisfaction that consumers receive from purchasing a good at a price lower than their maximum willingness to pay. It is calculated as the difference between the total amount the consumer is willing to pay and the actual amount they pay.

Statement 2 is also true. Graphically, consumer surplus is represented by the area below the demand curve and above the market price. It captures the difference between the price consumers are willing to pay (as indicated by their demand curve) and the price they actually pay in the market.

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