Reading # 14 - Demand and Supply Analysis

Question 1

Define what is Consumer Surplus

Answer 1

excess consumers would be willing to pay above what they actually pay for the equilibrium quantity of a good or a service

Question 2

Define formula to find consumer surplus

Answer 2

area of triangle bounded by demand curve and equilibrium price. (.5 x equilibrium quant x (price when QD is 0 - Price when QS is zero))

Question 3

Define what is producer surplus

Answer 3

excess that suppliers receive over the total cost to produce those units

Question 4

Define formula to find producer surplus

Answer 4

area of triangle bounded by market price, the supply curve, and the left-hand axis (.5 x equil. quant x (equili price - price a QS is 0)

Question 5

What does an indifference curve show?

Answer 5

shows all combinations of the two goods along an indifference curve are equally preferred

Question 6

what is the slope of a budge line made up of?

Answer 6

slope of the budget line reflects the relative price of two goods.

Question 7

how to find an excess supply or demand given a supply and demand function and prices?

Answer 7

put the prices in to the functions and subtract the answers to see if you have a supply or demand excess.