1.2.8 Consumer and Producer Surplus

Question 1

Consumer surplus

Answer 1

The difference between how much buyers are willing to pay for a good or service and what they actually pay.

Question 2

Producer surplus

Answer 2

The difference between what producers are willing and able to supply the good or service for and the price they actually receive.

Question 3

Price discrimination

Answer 3

Where an indents all good or service is sold to different groups of individuals who are willing and able to pay different prices.

Question 4

3 conditions for the price discrimination to work:

Answer 4

• product or service must be identical and be able to be sold in two separate markets
• good or service must not be able to be resold to other groups of consumers
• good or service must have different price elasticity ew of demand (PED)