SURPLUS Flashcards
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Draw a diagram showing consumer surplus
Diminishing marginal utility
As you consume more of a good, the marginal utility from each extra unit will decrease.
Marginal utility
The additional benefit received from consuming an extra unit of a good.
What is meant by consumer surplus
The difference between what consumers are willing to pay and what they actually pay.
Producer surplus
The difference between what producers are willing to sell for and what they actually sell for.
what explains why demand curves are typically downward sloping
Marginal utility decreases as quantity increases
As total quantity increases what happens to total utility and marginal utility
total utility increases
marginal utility decreases
What does the demand curve show
The demand curve shows marginal benefit
What does the supply curve show
The supply curve shows marginal cost
Add a diagram asking to define which area shows the change in consumer and producer surplus
