Which statement best describes the relationship between consumer surplus and market price?

The relationship between consumer surplus and market price is fundamentally linked to the notion of how much consumers are willing to pay versus what they actually pay in the market. Consumer surplus is defined as the difference between the maximum price a consumer is willing to pay for a good or service and the actual market price they pay.

When market prices increase, the actual price consumers must pay for goods or services rises, which typically reduces the consumer surplus. This decrease occurs because consumers gain less benefit from purchasing goods at higher prices, leading to a smaller difference between their maximum willingness to pay and the new, elevated market price.

In essence, as the market price climbs, it often eclipses the maximum price consumers are prepared to pay, resulting in fewer transactions or a decrease in the surplus they derive from those transactions. This dynamic illustrates why the correct statement highlights the inverse relationship between rising market prices and consumer surplus.