5) producer and consumer surplus

Question 1

Define consumer surplus

Answer 1

the value that consumers gain from consuming a good or service over and above the price paid

Question 2

Analyse the effect on consumer surplus from a shift left in the supply line

Answer 2

A shift left of the supply curve will raise the equilibrium price, causing a fall in consumer surplus. This is because those who were willing and able to pay less than the current price have been priced out of the market, and those that remain have a Lower consumer surplus because of the higher prices that they pay

Question 3

What might the size of the change in consumer surplus depend on??

Answer 3

The elasticity of supply and demand

Question 4

Define producer surplus

Answer 4

the difference between the price received by firms for a good or service and the price at which they would have been prepared to supply that goo

Question 5

What factors can cause a shift in the supply curve??

Answer 5

• Changes in technology
• regulation/ taxes
• changes in quality and quantity of factors of production
• increased labour
• changes in the price of other related goods
• number of suppliers
• firms expectations about future prices
• changes to costs of production