Income Effect on Normal Goods Boosts Consumer Surplus

Steps:

• Recall consumer surplus measures the benefit consumers get from paying less than their maximum willingness to pay.
• For a normal good, higher income increases demand, shifting the demand curve rightward.
• This shift raises equilibrium quantity and price, but expands the surplus area under the new demand curve.
• Evaluate each option's impact on demand and surplus.

Why A is correct:

• An increase in consumer incomes shifts the demand curve right for normal goods (per the income effect in demand theory), increasing total consumer surplus as more units are consumed below willingness-to-pay levels.

Why the others are wrong:

• B: More substitutes shifts demand left, reducing quantity demanded and consumer surplus.
• C: Higher complementary good price decreases this good's demand (cross-price effect), shifting demand left and lowering surplus.
• D: Higher price of the good shrinks the surplus triangle directly, as consumers pay more relative to willingness to pay.

Final answer: A