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Consumer surplus

Consumer surplus. And Producer surplus. Consumer surplus. What is it? The difference between what you paid, and what you were willing and able to pay. What does it look like? It is the area below the demand curve, and above the equilibrium price. Consumer surplus. $8. S. $7. $6.

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Consumer surplus

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  1. Consumer surplus And Producer surplus

  2. Consumer surplus • What is it? • The difference between what you paid, and what you were willing and able to pay. • What does it look like? • It is the area below the demand curve, and above the equilibrium price.

  3. Consumer surplus $8 S $7 $6 Consumer surplus $5 Equilibrium Price PRICE per Greebe $4 $3 $2 D $1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 QUANTITY (hundreds of Greebes)

  4. Producer Surplus • What is it? • The amount a seller is paid, minus the seller’s cost. • What does it look like? • It is the area above the supply curve, and below the equilibrium price.

  5. Producer surplus $8 S $7 $6 $5 Equilibrium Price PRICE per Greebe $4 Producer surplus $3 $2 D $1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 QUANTITY (hundreds of Greebes)

  6. Consumer & producer surplus $8 S $7 $6 Consumer surplus $5 Equilibrium Price PRICE per Greebe $4 Producer surplus $3 $2 D $1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 QUANTITY (hundreds of Greebes)

  7. The magic of perfectly competitive markets • At equilibrium, both consumer and producer surplus are at their maximum • Any interference with the equilibrium price in perfectly competitive markets will reduce total consumer and producer surplus

  8. What effect will rent controlhave on Consumer and ProducerSurplus? Who are the consumers? Who are the producers?

  9. Price Effect on consumer & producer surplus $8 S $7 Society’s loss $6 Consumer surplus $5 Equilibrium Price PRICE per apartment (in hundreds) $4 $3 Rent Control Producer surplus $2 D $1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 QUANTITY (hundreds of apartments)

  10. Any interference with the equilibrium price in perfectly competitive markets will reduce total consumer and producer surplus

  11. What effect will a minimum wagehave on Consumer and ProducerSurplus? Who are the consumers? Who are the producers?

  12. Price Effect on consumer & producer surplus $8 S $7 Society’s loss Consumer surplus $6 Minimum wage $5 PRICE per Worker (wage) $4 Equilibrium Price $3 Producer surplus $2 D $1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 QUANTITY (hundreds of Workers)

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