Question

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Why does a reduction in the price of a good increase consumer surplus? Discuss

Answer 1

Consumer surplus refers to the gap or difference between the amount of money the consumers are willing or able or ready to pay for some good or service and the amount yhey actually end up paying or the market proce depending upon the situation. It is also represented by the shaded region by the demand curve. So when the proce falls the quantity demanded of that particular hood or service increases and it leads to expansion the shaded tegion and thus increasing the consumer surplus. So basically when yhe price of a good falls the region which is lost die the proce fall is compensated by the region which is obtained by increase in the quantity demanded and thus the consumer surplus increases despite the falling proce of goods and services.