Consumer and producer surplus

Overview

Recall questions on Consumer and producer surplus.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is consumer surplus?

   Model answer

   The difference between the maximum price consumers are willing to pay for a good and the actual market price they pay.

2. 2

   On a supply and demand diagram, where is consumer surplus located?

   Model answer

   The area below the demand curve and above the market price line.

3. 3

   When demand and supply curves are linear, what shape do the consumer and producer surplus areas take on a diagram?

   Model answer

   Triangular shapes.

4. 4

   State the formula for calculating the area of a triangle.

   Model answer

   Area equals half multiplied by base multiplied by height (A = ½ × b × h).

5. 5

   When calculating consumer surplus from a diagram, where do you identify the starting point for measuring the height?

   Model answer

   Where the demand curve intersects the price axis (the vertical intercept of the demand curve).

6. 6

   In calculating consumer surplus, what price level forms the lower boundary of the height measurement?

   Model answer

   The equilibrium price.

Other ways to work this

The same content, four other ways.

What is inside Levo

Six ways to work the same material.