1.2.8 Consumer and Producer Surplus Flashcards

1
Q

What is a consumer surplus?

A
  • The difference between the price consumers are willing to pay and the price they actually pay, set by the price mechanism.
  • The demand curve shows the price consumers are wiling to pay, and so the difference between the demand curve and the price shows the consumer surplus
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a Producer Surplus?

A
  • The difference between the price and the supplier is willing to produce their product at and the price they actually produce at, set by the price mechanism.
  • The supply curve shows the price suppliers are willing to sell the good for, and so the difference between the supply curve and the the price shows the consumer surplus
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Which triangle illustrates consumer surplus?

A

Top (orange)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Which triangle illustrates producer surplus?

A

Bottom (purple)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the formula for total surplus/net welfare?

A

Consumer Surplus + Producer Surplus = Total Surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Perfectly elastic demand means…

A

there is no consumer surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Perfectly inelastic demand means…

A

that consumer surplus is infinite

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

The more inelastic demand…

A

the higher consumer surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

When supply is perfectly elastic…

A

producer surplus is 0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

When it is perfectly inelastic….

A

Producer surplus is infinite.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The more inelastic supply…

A

the higher producer surplus is likely to be

How well did you know this?
1
Not at all
2
3
4
5
Perfectly