Consumer & Producer Surplus

Question 1

Define consumer surplus

Answer 1

Consumer Surplus- extra amount of 💵 consumers prepared to pay for 🚘 or 🧹 above what they actually pay. Excess utility/satisfaction gained from 🚘 or 🧹 by extra amount paid for it

Question 2

Define producer surplus

Answer 2

Producer Surplus- extra amount of 💵 paid to producers above what willing to accept to supply a 🚘 or 🧹. Extra earning obtained by producer above minimum required to supply 🚘 or 🧹

Question 3

Describe the area represented by the consumer surplus

Answer 3

Upper section from the price along the demand curve (triangle)

Question 4

Describe the area represented by the producer surplus

Answer 4

Lower section from the price along the supply curve (triangle)

Question 5

How do changes in demand affect consumer & producer surplus?

Answer 5

• Increase in demand (rightward shift)- ⬆️ producer & consumer surplus
• Decrease in demand (leftward shift)- ⬇️ producer & consumer surplus

Question 6

How do changes in supply affect consumer & producer surplus?

Answer 6

• Increase in supply (rightward shift)- ⬆️ producer & consumer surplus
• Decrease in supply (leftward shift)- ⬇️ producer & consumer surplus