Microeconomics
Microeconomics
2nd Edition
ISBN: 9781464187025
Author: Austan Goolsbee, Steven Levitt, Chad Syverson
Publisher: Worth Publishers
Question
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Chapter 3, Problem 1RQ
To determine

Define consumer and producer surplus.

Expert Solution & Answer
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Explanation of Solution

Consumer surplus is the difference between the maximum willing price of a consumer and the actual price that a consumer pays. The general formula for calculating consumer surplus is shown below:

Consumer surplus=12×(Maximum willing to payActual pay)×(Quantity)

Producer surplus is the difference between the minimum willing price accepted by a producer and the actual price received by a producer. The general formula for calculating producer surplus is shown below:

Producer surplus=12×(Actually getting priceMinimum willing to Accept price)×Quantity

Economics Concept Introduction

Consumer surplus: Consumer surplus is the difference between the highest willing price of a consumer and the actual price that a consumer pays.

Producer surplus: Producer surplus is the difference between the lowest willing price accepted by a producer and the actual price received by a producer.

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