Answer to Question #59330 in Microeconomics for Bob

Question

Consider a particular market-clearing price and quantity under a perfectly competitive equilibrium. As the demand curve at this point becomes more inelastic, the consumer surplus in the market tends to

a. increase.
b. decrease.
c. remain the same.
d. We do not have enough information to answer this question.

Answer 1

a. increase.

Consumer surplus is an economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service relative to its market price. When demand curve becomes more inelastic the price what consumers are willing to pay increases, so consumer surplus increases too.