1.2.8-1.2.9 Surplus & Subsidies Flashcards
(9 cards)
What is consumer surplus?
The econmoic gain or benefit that consumers gain when they buy a product that is lower than the maximum price
What is producer surplus
The difference between the price producers are willing ad able to supply a product for the price they recieve in the market
How is consumer surplus shown on the graph?
Underneath the demand curve and above the market price
How do you calculate consumer surplus?
1/2 x (P x difference in Q)
How do you show producer surplus on the graph?
Area above the supply curve and the market price
What is a subsidy?
A form og government support offered to producers.
-Reduces the marginal cost of suppy
-leads to an increase in output sold
What is an indirect tax?
A tax imposed by the government that increases the supply costs of producers
How do you calculate tax?
tax = difference in price x quantity
