As a result of a decrease in price, a. new buyers enter the market, increasing consumer surplus. b. new buyers enter the market, decreasing consumer surplus. c. existing buyers exit the market, increasing consumer surplus. d. existing buyers exit the market, decreasing consumer surplus.

Question

Tomas

Business

20 August, 03:02

As a result of a decrease in price, a. new buyers enter the market, increasing consumer surplus. b. new buyers enter the market, decreasing consumer surplus. c. existing buyers exit the market, increasing consumer surplus. d. existing buyers exit the market, decreasing consumer surplus.

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Answers (2)

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Karlee Cooley · Answer 1

Option "A" is the correct answer to the following statement.

Explanation:

The decrease in the market price of a commodity or a product always supports in to increase the number of new consumers in the market.

New consumers in the market always create a higher demand for a commodity or product in the market.

The new consumer and lesser price in the market always created a higher consumer surplus.

Brayan Hess · Answer 2

b. new buyers enter the market, decreasing consumer surplus.

Explanation:

Demand is inversely related to price of a good, as per Law of Demand. More demand at lower price, less demand at higher price.

Consumer Surplus is the difference between price paid by a buyer & maximum price the buyer is willing to pay for a good. It is area below the demand curve & above the market price level.

As given case : If price is decreased, new buyers enter the market as per law of demand. Increase in demand is likely to increase the price due to competition among buyers. Higher price would reduce the consumer surplus i. e the difference between actual price & maximum price paying willingness of consumer.