2.4 consumer and producer surplus

Question 1

what is consumer surplus ?

Answer 1

It is the additional benefit gained by a consumer, the difference between what a consumer is willing and able to pay and the price they actually pay

Question 2

what does consumer surplus look like on a diagram ?

Answer 2

Question 3

how does a change in price affect consumer surplus ?

Answer 3

• an increase in price, leads to a decrease in consumer surplus
• a decrease in price, leads to an increase in consumer surplus

Question 4

what is producer surplus ?

Answer 4

producer surplus is the difference between the price a seller is willing and able to sell a good/service for and the price the seller actually receives

Question 5

what does producer surplus look like on a diagram ?

Answer 5

Question 6

how does a change in price affect producer surplus ?

Answer 6

• an increase in price, leads to a increase in producer surplus
• a decrease in price, leads to an decrease in producer surplus