Topic 4: Consumer and Producer Surplus
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Last updated 5:44 PM on 12/16/24
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4 Terms
1
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What is consumer surplus
The difference between the price that the consumer is willing and able to pay and what they actually pay
2
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How does the law of diminishing returns affect consumer surplus
Each extra unit generates less utility than the one already consumed = consumers are willing to pay less for the extra units
3
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Inelastic demand curves give a larger or smaller consumer surplus?
Larger - as they are willing to pay a higher price to consume the good
4
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What is the producer surplus
The difference between the price the producer is willing to charge and the price they actually charge
Note 
Flashcards (130)