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Question
Macroeconomics
Posted 3 months ago

What area represents consumer surplus in the graph shown here if this market is in equilibrium?

Choose 1 answer:
(A) P0P4ZXP_{0} P_{4} Z X
(B) XYZX Y Z
(C) P0YP2P_{0} Y P_{2}
(D) P0YP4P_{0} Y P_{4}
(द) P2YP4P_{2} Y P_{4}
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Answer from Sia
Posted 3 months ago
Solution
a
Consumer Surplus Definition: Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay
b
Identifying Consumer Surplus on the Graph: Consumer surplus is represented by the area under the demand curve and above the price level up to the quantity demanded at that price
c
Applying the Definition to the Graph: In the graph provided, the equilibrium price is at P2 and the equilibrium quantity is at Q1. The consumer surplus is the area under the demand curve above price P2 and up to quantity Q1
Answer
(C) P0YP2P_{0} Y P_{2}
Key Concept
Consumer Surplus in a Graph
Explanation
Consumer surplus is the area below the demand curve and above the equilibrium price, extending horizontally to the equilibrium quantity. In the provided graph, this is the triangular area P0YP2P_{0} Y P_{2}.

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