Total expenditure on a commodity is represented by the area TUVW. Consumer surplus is represented by?

Consider the diagram below which shows a demand curve (d).

Total expenditure on a commodity is represented by the area TUVW. Consumer surplus is represented by?

A. The area VWX
B. The area XTUV
C. XW/XT
D. TU/UV

Correct Answer: Option A

A. The area VWX

Explanation

Consumer surplus is the difference between what a consumer budgeted to have a commodity and the actual amount he paid to have the commodity.

From the diagram, the consumer budgeted TUX while the market price is TUVW, therefore, consumer surplus is TUX – TUVW which is equal to VWX.