Question

The shaded area in the following demand-supply graph is known as \(\underline{\hspace{2cm}}\). 
 

• A. Consumer Surplus
• B. Consumer Deficit
• C. Producer Surplus
• D. Producer Deficit

Hint:

Consumer surplus lies above the market price and below the demand curve, while producer surplus lies below the price and above the supply curve.

Answer 1

The Correct Option is A

In microeconomics, the demand–supply graph illustrates how price and quantity are determined in a competitive market. The shaded region in the diagram appears between the demand curve and the equilibrium price line, above the market price. This region represents the benefit consumers gain when they are willing to pay more than the actual price at which they purchase the product. The demand curve shows consumers' maximum willingness to pay, which is higher than the equilibrium price for the first several units. The difference between willingness to pay and the actual market price creates a triangular area known as consumer surplus. It measures the extra satisfaction or utility that consumers receive because they pay less than what they were willing to pay. Thus, the shaded area corresponds to consumer surplus.