CONSUMER + PRODCUER SURPLUS Flashcards
CONSUMER SURPLUS -
difference between price consumers are willing and able to pay for a g/s and prie they actually pay
What shapes usually producer /consumer surplus
+ where
Usually triangel shape
above below demand curve above price line
draw + highlight area of consumer surplus
basic demand and supply
with area of p1 a b
Consumers able to pay higher price than p1 but only paying p1 so they get
surplus and welfare
If increase price /contraction of demand consumer surplus shrinks as less people are able to pay and gain surplus from buying g/s this causes smaller triangle of area p2 c a + reduction in quantity demanded
shrinks
why with increase price /contraction of demand consumer surplus shrinks
+ draw new surplus
less people are able to pay and gain surplus from buying g/s this causes smaller triangle of area p2 c a + reduction in quantity demanded
=extension in demand by decreasing price explain what happens to consumer surplus
+ draw
more people are willing + able to pay so consumer surplus triangle grows from p3 d a with increase in quantity demanded
PRODUCER SURPLUS :
difference between price producers are willing and able to supply a good/service and the price they actually receive
waht type of triangel + where
shifted to the right : above supply curve and below the price line
At price of P1 all of those suppliers where
willing and able to sell g/s at lower price than P1 but actually selling it for P1
at price of p1 all suppliers were willing and able to sell g/s at lower price than P1 but actually selling it for P1 so
gaining surplus
what happens when theres a higher price with producer surplys
draw
get higher quantity of Q2
Producer surplus increased to acp2
when we drop price we get
draw
lower consumer surplus of p3ad
society surplus =
cs+ps
on equilib graph draw society syrplus + labelled
