Surplus

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8 Terms

1
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What is surplus?

This is the benefit of trade.

2
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What is total surplus?

This is the amount of benefit that both the producer and consumer gain from participating in the market.

3
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What is consumer surplus?

This difference between the price and the consumer’s willingness to pay.

4
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What is producer surplus?

This is the difference between the price and producer’s willingness to accept.

5
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How is consumer surplus defined algebraically?

WTP- Price or MPB - Price

6
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How is consumer surplus shown graphically?

Consumer surplus is defined by the red triangle region shaded in red.

<p>Consumer surplus is defined by the red triangle region shaded in red. </p>
7
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How is producer surplus defined algebraically??

Price- WTA or Price - MPC

8
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How is producer surplus defined algebraically?

Producer surplus defined by the triangle region shaded in blue.

<p>Producer surplus defined by the triangle region shaded in blue. </p>