1.2.8 Consumer and producer surplus

Question 1

What is consumer surplus?

Answer 1

The difference between the price that consumers are willing and able to pay for a good/service and the price that they actually pay

Question 2

What is producer surplus?

Answer 2

The difference between the price that producers are willing and able to supply a good/service for and the price they actually receive

Question 3

Where is consumer surplus found on a S&D diagram?

Answer 3

The area of the triangle between the demand curve, the Y-axis and the price line

Question 4

Where is producer surplus found on a S&D diagram?

Answer 4

The area of the triangle between the supply curve, the Y-axis and the price line

Question 5

What happens to consumer surplus if price changes?

Answer 5

If price inc.: consumer surplus dec.
If price dec.: consumer surplus inc.

Question 6

What happens to producer surplus if price changes?

Answer 6

If price inc.: producer surplus inc.
If price dec.: producer surplus dec.

Question 7

What is society surplus?

Answer 7

Society surplus = consumer surplus + producer surplus

Question 8

What happens to consumer surplus if supply shifts?

Answer 8

If supply shifts outwards: consumer surplus inc.
If supply shifts inwards: consumer surplus dec.

Question 9

What happens to producer surplus if demand shifts?

Answer 9

If demand shifts outwards: producer surplus inc.
If demand shifts inwards: producer surplus dec.