LS13 - Producer & Consumer Surplus Flashcards
What is consumer surplus?
Extra money consumers are prepared to pay for a good or service about what they actually pay
What does a higher consumer surplus mean?
The consumer is prepared to pay a lot more than what they actually pay, which means they have extra income to spend elsewhere
What is producer surplus?
Extra money paid to producers above the minimum price they are willing to accept for their good or service
What does more producer surplus mean?
Producers get a higher profit than they would have gotten had they sold their product at the minimum price
How do you find consumer surplus on a graph?
Area BELOW demand line but ABOVE price line
How do you find producer surplus on a graph?
Area ABOVE supply line and BELOW price line
What is society surplus?
Consumer Surplus + Producer Surplus
