Consumer and Producer Surplus (Micro)

Question 1

What is consumer surplus

Answer 1

It’s a measure of the welfare that people gain from consuming goods and services

Question 2

How do you measure consumer surplus

Answer 2

It’s the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually do pay

Question 3

How is consumer surplus shown on a graph

Answer 3

It is indicated by the area under the demand curve and above the market price

Question 4

How does consumer surplus change as supply costs are higher

Answer 4

Market price increases so the consumer surplus decreases

Question 5

How does a decrease in demand change consumer surplus

Answer 5

It causes an increase in consumer surplus

Question 6

How does elastic demand and inelastic demand effect consumer surplus

Answer 6

Elastic demand causes low consumer surplus and inelastic demand causes high consumer surplus

Question 7

What is producer surplus

Answer 7

The difference between the price producers receive for the good and the marginal cost of producing it

The difference between the price producers are willing and able to supply a good of service for and the price they actually receive

Question 8

How is producer surplus shown on the graph

Answer 8

Area above the supply curve and below market price

Question 9

How do supply costs effect producer surplus

Answer 9

Lower supply costs cause a lower market price and producer surplus to increase

Question 10

How does market demand affect producer surplus

Answer 10

An increase in market demand cause higher prices and an increased in producer surplus