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level: Consumer and Producer Surplus

Questions and Answers List

level questions: Consumer and Producer Surplus

QuestionAnswer
What is the Consumer Surplus and how may this Happen?-This is when the Consumer buys a Good for Less [say $2] than what they were Expecting [$5] -The Consumer Surplus above would be $3 - That's the Difference between the Price that a Consumer is Willing to Pay, and the Price they Actually Pay [Equilibrium Price] -This may happen as Consumers have simply Different Thought Engines, Preferences, Incomes and Views.
Describe where the Consumer Surplus would be seen in a Graph.-The Area that is Below the Demand Curve and Above the Equilibrium Price Line
What is the Producer Surplus and how may this Happen?-This is when the Producer gets More Money for a Product [$50] than they'd Hope, and Accept for [$30] -So Above the Producer Surplus is $20 - This is the Difference between the Price that a Producer is willing to Supply, and the Price they Actually Receive [Equilibrium Price] -This may happen as Different Producers will have Different Costs when making their Goods
Describe where the Producer Surplus would be seen in Graph-The Area Above the Supply Curve and Below the Equilibrium Price Line
A Supply and Demand Diagram for Rubber has just seen its Largest Producer in Portugal face a Devastating Tsunami 1. As a Result, Supply cuts back. What happens to Producer and Consumer Surplus?1. Call the Price Equilibrium Point X. Call the New Price Equilibrium [Supply Shifts to the Left] Point Y. The Consumer Surplus will Change from the Highest Price Point, The Price Equilibrium, and Point X, to again the Highest Price Point, The New Price Equilibrium and Point Y. The Producer Surplus will Change from the Lowest Price Point, The Equilibrium Price and Point X to again Lowest Price Point, New Price Equilibrium and Point Y.