Consumer And Producer Surplus

Question 1

Consumer surplus

Answer 1

Is the difference between the price that a consumer is willing to pay for a good or service and the price that they actually pay.

Question 2

Consumer surplus example

Answer 2

When a consumer pays less for a good than the amount that they’re prepared to pay for it,

This amount of money is known as the consumer surplus

If someone what prepared to pay 10 pounds for a good and bought it for 8 pounds then there would be a consumer surplus of 2 pounds.

Question 3

Producer surplus

Answer 3

Is the difference between the price that a producer is willing to supply a good or service at and the price that they actually receive for it (the equilibrium price).

Question 4

Producer surplus example

Answer 4

If a producer receives more for a product or service than the price they are willing to accept, the extra earnings are known as the producer surplus.

If the equilibrium price of a good is 15 pounds but the supplier would be happy to sell it for 10 pounds the producer surplus would be 5 pounds.

Question 5

Changes in supply and demand affect

Answer 5

Consumer and producer surplus

Question 6

Consumer surplus is

Answer 6

The area below the demand curve and above the equilibrium price line.

Question 7

Producer surplus is

Answer 7

The area above the supply curve and below the equilibrium price line.