What are the impacts of higher production of free digital goods to changes in consumer surplus and GDP? Refer to the following figure.

Question

BlackTom AI · Accepted Answer

Consumer surplus is the area under the demand curve above the market price; GDP (market output measured in national accounts) equals the sum of market prices times quantities sold. In the figure the price faced by consumers is P = 0 and the demand curve has intercept Pmax. Initially consumers consume q1, giving consumer surplus A (the blue triangle). When free digital output expands to q2 the additional consumer benefit is area B (the green triangle). Total consumer surplus rises from A to A + B.

Step-by-step reasoning and calculations:
1) For a linear demand with vertical intercept Pmax, consumer surplus at price P = 0 and quantity q is CS = ∫0^q D(p) dp = 1/2 * q * Pmax (area of a triangle).
2) Initially CS1 = 1/2 * q1 * Pmax = area A.
3) After expansion CS2 = 1/2 * q2 * Pmax = A + B.
4) The incremental consumer surplus gained = CS2 − CS1 = 1/2 * (q2 − q1) * Pmax = area B. This shows consumer surplus increases by B.

GDP implications:
1) GDP counts goods at their market prices: GDP contribution = price × quantity.
2) Here the market price for these digital goods is zero, so GDP contribution before = 0 × q1 = 0 and after = 0 × q2 = 0.
3) Therefore measured GDP does not change even though consumer welfare rises.

Why the correct answer is correct:
- Consumer surplus increases (area B added) because more free output yields additional welfare to consumers.
- GDP shows no change because free goods sold at price zero add no market value to GDP.

Why the other options are incorrect:
- “Lower GDP, higher consumer surplus” is wrong: GDP does not fall—there is simply no market value recorded, so it remains zero change.
- “Higher GDP, higher consumer surplus” is wrong: GDP would only rise if a positive market price existed; P = 0 implies no GDP increase.

Conclusion: GDP no change, higher consumer surplus (matches the provided answer).

What are the impacts of higher production of free digital goods to changes in consumer surplus and GDP? Refer to the following figure. 单项选择题

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