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Chapter 3: Q.31 (page 78)

What is consumer surplus? How is it illustrated on a demand and supply diagram?

Short Answer

Expert verified

The difference between what people would have been willing to pay and what they actually paid.

Step by step solution

01

Definition

Microeconomics: Microeconomics is a branch of economics that studies demand and supply mechanisms at the individual level, as well as consumer behavior and other such factors. The stream is critical for understanding the economic status of businesses and consumers.

02

Explanation

The difference between what individuals would have been willing to pay and what they actually paid is known as consumer surplus. Consumer surplus is represented by the area labeled F, which is above the market price and below the demand curve. 1st Illustration.

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Most popular questions from this chapter

If the price is above the equilibrium level, would you predict a surplus or a shortage? If the price is below the equilibrium level, would you predict a surplus or a shortage? Why?

A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium price and quantity of flat screen TVs?

Review Figure 3.4. Suppose the price of gasoline is \(1.60per gallon. Is the quantity demanded higher or lower than at the equilibrium price of \)1.40per gallon? What about the quantity supplied? Is there a shortage or a surplus in the market? If so, how much?

We know that a change in the price of a product causes a movement along the demand curve. Suppose consumers believe that prices will be rising in the future. How will that affect demand for the product in the present? Can you show this graphically?

How can you locate the equilibrium point on a demand and supply graph?
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