Final Project

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Transcript Final Project

Consumer; Producer Surplus
and Deadweight loss
Neeti Patel
What is consumer and producer
• Consumer surplus
– is the difference between the price a buyer
wants to pay and what they actually pay
• Producer surplus
– is the difference between what the firm could
pay to provide a good or service and what
they due pay
Supply and Demand
What is dead weight loss?
• Dead weight loss
– is when a firm and/or market is not producing
at allocative efficiency, it can occur if a firm is
producing above or below allocative efficiency
and depending on that you will either get a
decrease in consumer or producer surplus.
Result of a shift in Supply
Related Topics:
• Consumer, Producer Surplus and
Deadweight Loss exists in every market
structure (oligopoly, monopoly, perfect
competition, etc. ), but it is most closely
related to Utility and Elasticity
2003 (Form B) question 2
(i) correct answer is domestic supply and quantity 1; because on
the graph there are multiple quantity and only one price, there are
other prices there but the are not in reference to what we are
looking for (ii) consumer surplus is located under the supply curve
and above the price (iii) producer surplus is located above the
demand curve and below the price
(i) It’s a world price, it acts as a price ceiling so suppliers are not
allowed to charge more than Pw therefore suppliers buy goods at
Q1 and demanders will buy at Q5.
(i) The graph shows that suppliers are producing at Q2 instead of
Q1, so subtract Q2 – Q1 (ii) demanders are purchasing at Q4
instead of Q5 so subtract Q5 – Q4 (iii) consumer surplus is
located under the demand curve and above the Price (iv)
producer surplus is located above the supply curve and below the
Question 1
Question 2
Question 3