Comsumer and producer surplus

Question 1

What is consumer Surplus

Answer 1

when the price consumers pay for a product or service is less than the price they’re willing to pay

Question 2

What is producer surplus?

Answer 2

the difference between how much a person would be willing to accept for a given quantity of a good versus how much they can receive by selling the good at the market price.

Question 3

What causes consumer and producer surplus to change?

Answer 3

If the price were to increase, this would be worse for consumers and better for producers. So there would be a decrease in consumer surplus and an increase in producer surplus.

Question 4

How do changes in demand affect consumer and producer surplus?

Answer 4

When demand increases, consumers are willing to pay higher prices for a good. This leads to an increase in consumer surplus as more people benefit from lower prices. Producer surplus may also increase as producers can charge higher prices.

Question 5

How might the monopoly affect consumer and producer surplus?

Answer 5

can increase producer surplus, they generally lead to a reduction in consumer surplus and overall economic welfare