1.2.8 Consumer and Producer Surplus

Question 1

What is consumer surplus?

Answer 1

The difference between the price the consumer is willing to pay and the price they actually pay, set by the price mechanism.

Question 2

Describe Consumer / Producer surplus on a graph

Answer 2

Cole Palmer

Question 3

What is producer surplus?

Answer 3

The difference between the price the supplier is willing to produce their product at and the price they actually produce at.

Question 4

What do consumer and producer surpluses show us?

Answer 4

The economic gain from the buying and sellingof a good.

C = welfare gained by consumer - total satisfaction is the total area under the demand curve.

P = economic gain for producers from selling the good.

Question 5

What would perfectly elastic demand mean for consumer surplus?

Answer 5

There is none because consumers will only buy at a specific price, and any price above that results in no purchase

Question 6

What does perfeclty inelastic demand mean for consumer surplus?

Answer 6

There is infinite - no matter the price people will buy.

Question 7

Relationship between inelastic demand and consumer surplus?

Answer 7

Higher inelastic demand is = higher consumer surplus will be.

Question 8

Explain supply elasticities on producer surplus?

Answer 8

Supply is perfectly elastic = producer surplus is 0

When supply is perfectly inelastic = producer surplus is infinite

Question 9

The more inelastic supply is, the X producer surplus is likely to be?

Answer 9

Higher