Consumer and producer surplus Flashcards
What is the marginal benefit curve the same as
The demand curve
What is consumers surplus
the difference between what consumers are willing to pay and what they actually pay
What is the law of diminishing utility
as you consume more of a good, the marginal utility (benefit) you get from an extra unit will decrease
Why does the marginal benefit/ demand curve decrease as quantity increases
Because of diminishing marginal utility
What is producer surplus
the difference between what producers are willing to sell for and what they actually sell for
Why are producers wiling to sell at low prices on the marginal utility curve
Because producers produce their goods at the l;west cost of production
What will happen to producer surplus after and increase in demand and state what this tells us and state what this tells us
Producer surplus will increase, this tell us that the benefit of producers has increased.
- this tell us that the benefit of producers has increased. Producers are better off because of consumers are demanding more, producers can sell more
What will happen to producers surplus after a decrease in demand and state what this tells us
Producers surplus will decrease
- this tell us the befit receive by producers has decreased. Producers are worse off because if consumers are demanding fewer goods producer cannot sell as much and will have to sell their goods at lower prices
What happens to consumer surplus after an increase in supply and state what this tells us
consumer surplus has increase, we have gained consumer surplus.
- This tell us the befit consumer get have increased, consumer are better off - can enjoy more at lower prices
What happens to consumer surplus after a decrease in supply and state reheat this tells us
Our consumer surplus has decreased
- this tells us the befits of consumers has decreased, consumers are worse off and don’t consume as much as before
What is deadweight loss
e loss of economic efficiency when the equilibrium price and quantity is not achieved
When producers profit maximise/ price discriminate, where would the deadweight loss be on the diagram
The diagnose to the right of where MC = MR
