Surplus

Question 1

What are the different tutors of surplus that occur in an economy?

Answer 1

Total surplus, Consumer surplus, Producer surplus

Question 2

What is producer surplus and where does it exist in relation to EP & EQ?

Answer 2

Producer surplus is the difference between the opportunity cost of what it takes to produce a good/service and the value that consumers are willing to pay for it. It lies below the market equilibrium

Question 3

What is consumer surplus and where does it lie in relation to the equilibrium?

Answer 3

Consumer surplus is the difference between what consumers pay for a good/service and the value that they actually assign to or expect to get from the good/service and it lies above equilibrium.

Question 4

What is Total surplus?

Answer 4

Total surplus is the addition of consumer surplus and producer surplus, so essentially the benefit reaped by all of of society and can sometimes include govt. revenue/ surplus. In relation to equilibrium it is the area between the demand and supply curve before they intersect.

Question 5

What is deadweight loss? And when does it occur?

Answer 5

Deadweight loss is a decrease in the total surplus of a market and occurs when the economy becomes inefficient.