2.4 Consumer And Producer Surplus

Question 1

What is a consumer surplus

Answer 1

This is the difference between the price the consumer is willing and able to pay and the price they actually pay

Question 2

How is consumer surplus displayed on a diagram

Answer 2

Question 3

Explain the consumer surplus on this diagram

Answer 3

Question 4

What is a producer surplus

Answer 4

This is the difference between the price the producer is willing to charge and the price they actually charge

Question 5

How is producer surplus displayed on a diagram

Answer 5

Question 6

What was the effect of change in the price on the consumer surplus in this diagram

Answer 6

An increase in demand from D1 to D2 increases consumer surplus from PQR to ABC

Question 7

What was the effect of change in the price on the consumer surplus in this diagram

Answer 7

Supply has shifted left. This causes market price to increase and consumer surplus to decrease from PQR to ABR

Question 8

What was the effect of change in the price on the producer surplus in this diagram

Answer 8

This is caused by a shift in the supply curve from S1 to S2 meaning market prices decrease and producer surplus increases from ABC to PQS

Question 9

What was the effect of change in the price on the producer surplus in this diagram

Answer 9

Producer surplus increases from area PQD to ABD