1.2.8 - Consumer & Producer Surplus

Question 1

What Is Consumer Surplus (CS)?

Answer 1

Difference between the price the consumers are willing and able to pay for a good of service, and the price they actually pay.

Question 2

Where Is Consumer Surplus Found?
(2 Points)

Answer 2

~ Area below the demand curve.

~ Area above the price line.

Question 3

Describe This Consumer Surplus Graph
(3 Points)

Answer 3

~ CS1 = A + B + P1.

~ Raised price (P1 to P2) -> CS2 = A + C + P2. Decreased CS.

~ Dropped price (P1 to P3) -> A + D + P3. Increased CS.

Question 4

What Is Producer Surplus (PS)?

Answer 4

Difference between the price producers are willing and able to supply a good or service, and the price that they actually receive.

Question 5

Where Is Producer Surplus Found?
(2 Points)

Answer 5

~ Area above the supply curve.

~ Area below the price line.

Question 6

Describe This Producer Surplus Graph
(3 Points)

Answer 6

~ PS1 = P1 + A + B.

~ Raised price (P1 to P2) -> PS2 = P2 + C + A. Increased PS.

~ Dropped price (P1 to P3) -> P3 + D + A. Decreased PS.

Question 7

What Is Society Surplus (SS)?
(2 Points)

Answer 7

~ Sum of CS and PS.

~ CS + PS = SS.

Question 8

How Do You Work Out Consumer Surplus On This Diagram?
(3 Points)

Answer 8

~ Before shift -> CS1 = A + B + P1.

~ After shift & price change -> CS2 = A + C + P2.

~ CS has decreased at a higher price.

Question 9

How Do You Work Out Producer Surplus On This Diagram?
(3 Points)

Answer 9

~ Before shift -> PS1 = P1 + A + B.

~ After shift & price change -> PS2 = P2 + C + A.

~ PS has increased at a higher price.