Consumer and Producer Surplus (1.2.8)

Question 1

What’s Consumer Surplus?

Answer 1

The difference between how much consumer pays and how much they are willing to pay. At any price point there will be consumers who are willing to pay more for that good or service.

Question 2

What’s an example of Consumer Surplus?

Answer 2

If consumer is willing to pay £18 to watch a movie and the price is £15, their consumer surplus is £3

Question 3

Where is Consumer Surplus shown on a graph?

Answer 3

Top Triangle (P1AB)
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Question 4

What’s Producer Surplus?

Answer 4

The difference between how much a producer recieves and the cost of producing it. At any Point there will be producers willing to supply that good for less.

Question 5

What’s an example of Producer Surplus?

Answer 5

If a producer is willing to sell a laptop for £450 and the price is £595, their producer surplus is £145

Question 6

Where is Producer Surplus shown on a graph?

Answer 6

Bottom Triangle (P1BC)

Slide 36

Question 7

If Supply and Demand are at equilibrium what does that mean for Producer and Consumer Surplus?

Answer 7

They will be the same

Question 8

What will a decrease in demand mean for Consumer and Producer Surplus? What does this look like on a graph?

Answer 8

As both price and output decrease both Consumer and Producer Surplus will fall.
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Question 9

What will an increase in demand mean for Consumer and Producer Surplus?

Answer 9

Have the opposite effect and increase consumer and producer surplus.

Question 10

What will an decrease in supply mean for Consumer and Producer Surplus? What does this look like on a graph?

Answer 10

Lead to a fall in consumer and producer surplus.
Slide 38

Question 11

What will an increase in supply mean for Consumer and Producer Surplus?

Answer 11

Have the opposite effect and increase consumer and producer surplus.