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
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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
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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
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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
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