7 Consumer and producer surplus Flashcards
1
Q
Consumer surplus
A
- difference between the price a consumers are willing and able to pa and the market price
- some consumers are willing and able to pay more than market price
- however we assume they will pay market price therefore payling less
2
Q
Producer surplus
A
- difference between the price at which producers are willing and able to supply products at market price
- some producers are willing and able to sell for less than market price
- however we assume they will supply at market price and therefore receive more money for products
3
Q
Evaluation of the impact of a change in price on consumer surplus
A
- as price goes down there will be more consumer surplus however depends on PED
- more inelastic PED the more consumer surplus increases
4
Q
Evaluation of the impact of a change in price on producer surplus
A
- as price goes down there will be more producer surplus however depends on PES
- more inelastic PES the more producer surplus increases