A Level Economics AQA Practice Exam

Which of the following factors affects consumer surplus?

1. Government pension plans

2. The price set by the producer

3. The level of competition in the market

4. The distribution of goods

The correct answer is: The price set by the producer

The price set by the producer directly impacts consumer surplus because consumer surplus is defined as the difference between what consumers are willing to pay for a good and what they actually pay. When producers set a price, it determines the actual cost consumers incur to acquire the product. If the price is lower than the maximum price consumers are willing to pay, it results in a higher consumer surplus, as they benefit from paying less than their perceived value of the good. In contrast, while government pension plans, the level of competition in the market, and the distribution of goods can influence market conditions and overall economic dynamics, they do not have a direct effect on the calculation of consumer surplus in the same way that the price set by a producer does. The price directly shapes the consumer experience and surplus in transactions.