ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Consumer surplus always increases as the price of a good falls and decreases as the price of a good rises.

Detailed explanation-2: -Changes in the equilibrium price are directly related to producer surplus, other things equal. As the equilibrium price increases, the potential producer surplus increases. As the equilibrium price decreases, producer surplus decreases.

Detailed explanation-3: -How does consumer surplus change as the equilibrium price of a good rises or falls ? As the price of a good rises, consumer surplus decreases, and as the price of a good falls, consumer surplus increases .

Detailed explanation-4: -a) Consumer surplus is equal to the maximum amount a consumer is willing to pay for a good, minus what the consumer has to pay for the good.

Detailed explanation-5: -If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.