Handout 10(Consumer & producer surplus)

Question 1

What is a consumer surplus?

Answer 1

• It is the measure that consumers get from consuming a good or service
• It is the area above the equilibrium and under the demand curve

Question 2

What happens to the consumer surplus if the price increases?

Answer 2

There is a decrease in consumer surplus

Question 3

What is the producer surplus?

Answer 3

• The measure of welfare a producer gets from selling a good or service
• It is the area below the price and above the supply curve