economics theme 1 : consumer and producer surplus

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4 Terms

1
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consumer surplus definition

difference between the price that a consumer is prepared to pay the actual price paid

2
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producer surplus

difference between the market price received by the seller and the price they would have been prepared to supply at

3
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consumer surplus explanation

  • some consumers would be willing to pay up to price A

  • the actual price is P

  • consumer surplus is shown between points ABP

4
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producer surplus explanation

  • producer would take price PM

  • someone offers price P1

  • producer surplus is shown between P1, PM and the equilibrium point