1.2.8 - consumer and producer surplus

Question 1

What is consumer surplus?

Answer 1

The difference between what consumers are willing and able to pay and what they actually pay.

Question 2

What is producer surplus?

Answer 2

The difference between the price firms are willing and able to supply and the price they actually receive in the market.

Question 3

Where is consumer surplus found on a supply and demand diagram?

Answer 3

Between the market/equilibrium price and the demand curve.

Question 4

Where is producer surplus found on a supply and demand diagram?

Answer 4

Between the market/equilibrium price and the supply curve.

Question 5

How would an increase in demand affect consumer and producer surplus?

Answer 5

• Increase in consumer surplus
• Increase in producer surplus

Question 6

How does a decrease in supply affect consumer and producer surplus?

Answer 6

• Decrease in producer surplus
• Decrease in consumer surplus

Question 7

How does a decrease in demand affect consumer and producer surplus?

Answer 7

• Decrease in producer surplus
• Decrease in consumer surplus

Question 8

How does an increase in supply affect consumer and producer surplus?

Answer 8

• Increase in consumer surplus
• Increase in producer surplus