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Consumer surplus is defined as the difference between the amount a consumer is willing to pay and the amount he:
Asaves from income
Bearns as income
Cactually pays
Dspends on all goods
Answer & Solution
Correct answer: C. actually pays
1. Consumer surplus = what a consumer is ready to pay minus what he actually pays.
2. Willingness to pay is reflected by the demand curve, while the amount paid is the market price.
3. Income, savings, and total spending are unrelated to this gap, so those options are wrong.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit II "Theory of Consumer Behaviour", p.8_
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