2.4 consumer and producer surplus Flashcards
(12 cards)
what’s consumer surplus
the difference between the price a consumer is willing to pay for a product and the price they actually pay
what is producer surplus
the difference between the price a producer is willing to supply a product at and the price actually received for the product
where is consumer surplus shown on a graph
above the P line
area/ triangle above the p line shows the consumer surplus that is received by those consumers who would have been willing to pay more than the price P
if the price of a good increases, what will happen to consumer surplus
consumer surplus will decrease.
quantity demanded will decrease
if the price of a good decreased, what will happen to consumer surplus
consumer surplus will increase
quantity demanded will increase
where is producer surplus shown on the graph
below the P line
if the price of a good increases, what will happen to producer surplus
quantity supplied would increase
producer surplus would increase
if the price of a good decreased, what will happen to producer surplus
quantity supplied would decrease
producer surplus would decrease
a reduction in demand will lead to…
a fall in consumer surplus
a reduction in supply will lead to…
a fall in producer surplus
an increase in demand will lead to…
an increase in consumer surplus
an increase in supply will lead to…
an increase in producer surplus
