Why would buying the cheapest goods possible not always maximize consumer surplus?
Consumer Surolus is the difference between willingness of consumer to pay for that product and the actual price paid by the consumer.Example- A student wants to buy a Textbook.He is ready to pay $ 40 for that textbook.The shopkeeper offers that Textbook for $ 10.. Thus,the student saved $ 30. This is consumer surplus.If the shopkeeper reduces the price further,the student can maximise his surplus and vice versa.
In case of cheap goods it is not possible to maximise consumer surplus.Example- A student wants to buy a eraser.He is ready to pay 20 cents .The shopkeeper offers that eraser for 15 cents. In this case, the shopkeeper cannot decrease the price of eraser any more (because it is cheap good).Thus,the student could not maximise his surplus in case of cheap goods.
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