2.5c Consumer And Producer Surplus

Question 1

Consumer surplus meaning

Answer 1

The difference between the maximum price consumers are willing to pay for good and serve and what they actually pay for

Question 2

Producer surplus meaning

Answer 2

The difference between the minimum price producers are willing and able to supply for and the price they actually receive

Question 3

Essay Evaluation
How variation of PED determine the extent of changes in consumer surplus

Answer 3

-Change in consumer surplus depends on the relative extent of the price change
-also depends on coefficient of PeD
- it is assumed that price change is the only factor that determines a change in consumer surplus