chapter 7

Question 1

What is consumer surplus

Answer 1

The difference between what consumer are willing to pay and what they actually pay

Question 2

What is a producer surplus

Answer 2

The difference between producers are willing to accept for a good/service vs what price they actually get

Question 3

How is consumer surplus graphically represented

Answer 3

Area below the demand curve and above the market price

Question 4

How is producer surplus graphically represented

Answer 4

Area above the supply curve and below the market price

Question 5

What happens to consumer surplus when price of a good decreases

Answer 5

Consumer surplus increses because they pay less than what they were willing to pay

Question 6

What happens to producer surplus when the rpice of a good increases

Answer 6

Producer surplus increases because they are receiving a higher price than they were willing to accept

Question 7

What is deadweight loss

Answer 7

The loss of economic efficiency when the equilibrium outcome is not achieved (due to taxes,price control, and subsidies)

Question 8

How to calculate consumer surplus

Answer 8

1/2 * base*height(max price-min)