Which scenario illustrates a decrease in consumer surplus?

A scenario that demonstrates a decrease in consumer surplus is when the price of a necessity increases. Consumer surplus refers to the benefit that consumers receive when they are able to purchase a product for less than the maximum price they are willing to pay. When the price of a necessity goes up, consumers have to spend more to acquire the same amount of that good, which effectively diminishes the difference between what consumers are willing to pay and what they actually pay. As a result, consumer surplus decreases because consumers are now receiving less benefit from the same product compared to when it was less expensive.

In contrast, a reduction in consumer income would generally lead to a decrease in overall purchasing power, affecting the quantity of goods consumed but not directly illustrating a change in consumer surplus for a specific product. The appearance of a new competitor offering lower prices typically increases consumer surplus, as consumers benefit from lower prices. Similarly, the introduction of a subsidy for goods would enhance consumer surplus by lowering the effective price consumers pay, thereby increasing their surplus.