How willingness to pay , consumer surplus , and demand curve are related.
Explanation of Solution
The consumer surplus is the difference between the maximum willing to pay
The peak point of the demand curve is the maximum willing to pay price by the consumer and thus, the height of the demand curve represents the maximum willingness to pay price of the consumer for the commodity. The area below this price and above the actual paying price represents the consumer surplus of the economy, which is equal to the price that the consumer is willing to pay minus the price actually paid. In this way, the consumer surplus, willingness to pay, and the demand curve are closely related.
Concept introduction:
Consumer surplus: It is the difference between the highest willing to pay price of the consumer and the actual price that the consumer pays.
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Chapter 7 Solutions
Principles of Economics
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