Producer/Consumer Surplus

Question 1

Consumer Surplus

Answer 1

The difference between the price a consumer is willing and able to pay and the actual price.

Question 2

Producer Surplus

Answer 2

The difference between the price a producer is willing and able to supply at and the actual price.

Question 3

Consumer Surplus area

Answer 3

The area between the Demand curve and where P1 meets the demand curve. A reduction in price increases the area by the new trapezium created.

Question 4

Producer Surplus area

Answer 4

The area between the demand curve and where the S1 meets the supply curve.