Question

Question 1 Consumer surplus is the difference between the A market price and the minimum price required to induce production B full economic price and the minimum price required to induce production market price and the maximum willingness to pay of consumers D) quantity demanded and the quantity supplied at the market price Question 2 If an increase in the price of hot tea decreases the demand for honey, this indicates that A the two goods are substitutes the two goods are complements

Answer 1

1. Option C.

Consumer surplus shows the difference between the market price and the maximum price the consumers are willing to pay for any good or a service.

We can say that consumer surplus is maximized if the market price is much lower than the maximum price they are willing to pay for any good.

But this surplus is said to fall when the government places a price floor above the equilibrium price level.

2. Option B.

Two goods are said to be complementary goods if they have negative cross price elasticity of demand.

This means that when the price of one good increases, the demand for another good falls and vice versa.

Here, when the price of hot tea increases, the demand for honey decreases.

Hence we can say that hot tea and honey are complements.