Question 6
Theory of Consumer BehaviourA consumer surplus measures the
- A.benefits derived from consuming a cheap commodity
- B.excess of total expenditure over total utility
- C.difference between marginal utility and marginal cost
- D.excess of marginal utility over price.
Show the answer and explanation
Answer: D (excess of marginal utility over price.)
Explanation
Consumer surplus is the extra satisfaction a buyer gets above what he pays, i.e. what the good is worth to him minus its price.