Final answer:
Consumer surplus is the benefit consumers receive when they pay less than what they are willing to pay for a product. In the given scenario, a subsidy that lowers the price of a shuttle service would increase consumer surplus. The area representing consumer surplus on a graph is above the market price and below the demand curve, designated as area F.
Step-by-step explanation:
The concept of consumer surplus represents the difference between the amount consumers are willing to pay for a good or service and the amount they actually pay. In the resort shuttle scenario, assuming the original shuttle service price was $20 and the resort begins to subsidize the service to offer it for only $10, the total consumer surplus can be calculated.
To calculate the original consumer surplus, let's reference option (a) which provides an example. If the shuttle service was initially at an equilibrium price of $600 with a quantity of 20,000 and the subsidy reduces the price to $10, the consumer surplus would increase because the price consumers are willing to pay is greater than the subsidized price.
The change in consumer surplus would be the area between the demand curve and the new price, minus the area between the demand curve and the previous price. A subsidy leading to a price reduction would typically raise consumer surplus. As for a $5 discount, it would provide a smaller increase in consumer surplus compared to a larger subsidy.
Consumer surplus is the area on a graph labeled F, which is above the market price and below the demand curve. This area indicates the benefit consumers receive by paying less than what they are willing to pay for a certain quantity of the good or service.