Question

What are consumer surplus and producer surplus? Where are they on the market curve?

What are consumer surplus and producer surplus? Where are they on the market curve?

Homework Answers

Answer #1
  • Consumer surplus refers to the difference between the amount the consumer is willing to pay and the price they actually for those goods and services.
  • Consumer surplus is said to be positive if the amount they are willing to pay is greater than the amount paid by them.
  • It is negative when the amount they pay is greater than the amount they could pay.
  • While the producer surplus is the difference between the amount of goods and services the producer is willing to supply and the price it recieves.
  • Consumer surplus is the area below the demand curve and above the supply curve in the demand-supply curve.
  • Producer surplus is the area above the demand curve and below the supply curve in the demand-supply curve.

The below diagram illustrates the area of both the consumer and producer surplus:-

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