What is the correct answer?


In respect of which of the following category of goods is consumers surplus highest?

A. Giffen goods

B. Necessities

C. Luxuries

D. Prestige goods

Correct Answer :

B. Necessities

Consumer Surplus is defined as the difference between the price a consumer is willing to pay for a product and the price that he has actually paid . the consumer surplus for the goods which are less elastic (i.e. necessities) is higher. As an example, for a necessity like food, the consumer would be willing to pay a higher price as it is a necessity so the consumer surplus would be higher in the case of necessities.}

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