Question : The concept of the consumer's surplus is based on the difference between:
Option 1: Total utility and marginal utility
Option 2: Total utility and price
Option 3: Total utility and consumer income
Option 4: Price and consumer income
Correct Answer: Total utility and price
Solution : The correct answer is (b) Total utility and price.
Consumer surplus is the difference between the maximum amount a consumer is willing to pay for a good or service and the amount they actually pay. It is based on the economic theory of marginal utility, which states that the additional satisfaction a consumer gets from consuming one more unit of a good or service decreases as the consumer consumes more units.
Consumer surplus is an important concept in economics because it measures the economic welfare of consumers. A higher consumer surplus means that consumers are better off. Governments can use policies such as taxes and subsidies to increase or decrease consumer surplus.
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