Consumer & Producer Surplus (Week 3)

Question 1

What is consumer surplus

Answer 1

When a consumer pays less for a good than the amount they are prepared to pay, the amount of money is the surplus

Question 2

What is producer surplus

Answer 2

If a producer receives more for a product or service than the price they are willing to accept, the extra money is the surplus

Question 3

Where is the consumer surplus on a supply and demand graph

Answer 3

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

Question 4

Where is the producer surplus on a supply and demand graph

Answer 4

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

Question 5

What does the consumer and producer surplus relate to

Answer 5

The size of the benefit to consumers and producers from a given price level. When prices change, consumer and producer surpluses change.

Question 6

What affects consumer and producer surplus

Answer 6

Changes in supply and demand

Question 7

Anything that causes a shift in the supply or demand curve can lead to a change in…

Answer 7

The price of a good

Question 8

How does a change in price affect consumer and producer surplus

Answer 8

A change in price either brings a good closer or further away from the amount the buyer was willing to pay or the supplier was willing to sell for (changing the surplus).