Chapter 1. eFigure 3.7

eFigure
The Effects of a Price Ceiling
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You must read each slide, and complete any questions on the slide, in sequence.
E-Figure Title
Question 1 of 4

Question 1.

Please determine which of the following statements is an accurate description of the relationship between the price of pizza and consumer surplus, as shown in the graph.

A.
B.
C.
D.

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Correct! Based on the law of demand, we know that as price rises consumers will purchase less of a good. In this case, as price rises consumers purchase less pizza. Accordingly, the area representing consumer surplus (under the demand curve and above price, up to the quantity purchased) will become smaller. This results from both a higher price, and the reduced consumption.
Incorrect. Based on the law of demand, we know that as price rises consumers will purchase less of a good. In this case, as price rises consumers purchase less pizza. Accordingly, the area representing consumer surplus (under the demand curve and above price, up to the quantity purchased) will become smaller. This results from both a higher price, and the reduced consumption.