Final answer:
Consumer surplus is the difference between what consumers are willing to pay for a good and the market price they actually pay. It is the area above the equilibrium price and below the demand curve on a graph. Willingness to pay is the maximum price a consumer is prepared to pay, directly affecting the consumer surplus.
Step-by-step explanation:
Understanding Consumer Surplus with iPhones
When analyzing consumer surplus, particularly in the context of Poornima buying an iPhone, this economic measure is calculated by the difference between what consumers are willing to pay for a good and what they actually pay. If Poornima values an iPhone at $1200 due to the utility she derives from it, but purchases it at the market price of $1000, her consumer surplus is $200. This surplus encompasses the economic concepts of willingness to pay and the demand curve. The consumer surplus is represented graphically as the area above the equilibrium price and beneath the demand curve in a supply and demand diagram, which can be denoted by a specific area, such as 'F'.
The willingness to pay influences consumer surplus directly, as it represents the maximum price at which a consumer like Poornima would buy the iPhone. It can vary among individuals based on personal valuations of utility from the product. When the market price is lower than what Poornima is willing to pay, she gains consumer surplus, which quantifies the benefit received from purchasing a good for less than the maximum price she would have been willing to pay.