Consumer Surplus Zero When Demand is Flat

Steps:

• Define consumer surplus as the area below the demand curve and above the market price.
• Recognize that surplus is zero if the demand curve coincides with the price line, eliminating any gap.
• Evaluate elasticity: perfectly elastic demand is horizontal, matching price to willingness to pay.
• Rule out supply elasticities, as they affect producer surplus, not consumer.

Why A is correct:

• Perfectly elastic demand means a horizontal curve where willingness to pay equals price everywhere, so consumer surplus (integral of demand above price) is zero.

Why the others are wrong:

• B: Perfectly inelastic demand is vertical; surplus forms a triangle above price up to the curve's height.
• C: Perfectly elastic supply sets price but leaves demand's downward slope, creating triangular surplus.
• D: Perfectly inelastic supply is vertical; demand slope still generates surplus above price.

Final answer: A