1.2.8 consumer and producer surplus

Question 1

COnsumer surplus

Answer 1

-DIfference between amount a consumer is willing and able to pay and the price they actually pay
-Additional utility gained

Question 2

Producer surplus

Answer 2

-Difference between the amount a producer is willing and able to sell for and the price they actually sell for
-Additional profit earned

Question 3

Surpluses on s+d diagram

Answer 3

Consumer:
-Beneath demand curve above price

Producer:
-Above supply curve beneath price

Question 4

Affect of changes in s+d on surpluses

Answer 4

Increase in demand:
-consumers willing to pay higher prices so an increase in consumer surplus
-could decrease as price rises
-producer can charge higher price and increase surplus

Decrease in demand:
-lower prices
-CS increase
-PS decrease

Increase in supply:
-Price fall
-CS increase
-PS decrease

Decrease in supply:
-CS decrease
-PS increase