"As the demand (marginal benefit) curve becomes less elastic, if the equilibrium price and quantity remain unchanged, consumer surplus: A. Decreases B. Increases C. Remains unchanged D. It is not possible to determine with the information provided Answer: B. Doesn’t make sense to me… anyone able to explain? Thanks a lot in advance.
Mike*3, When demand is less elastic (starting to be inelastic), consumer surplus (willingness to pay minus actual payment) will increase because there are many potential buyers that are willing to pay the higher price to continue to consume the product. Try to graph the change in demand and the answer will be obvious…
thanks
one easy way to remember…just remember graphs… when demand is elastic the line is horizontal…demand is becoming less elastic so curve will move downwards… now consumer surplus is portion above price level… so it increases…
Mike, I second the idea of graphing it, while keeping cfa austin’s description in mind. Now, I’ve got to start my own econ thread!
less elastic = inelastic CFAaustin does a good job of summarizing.