A-Level - Consumer Surplus & Producer Surplus

Consumer surplus is when:

• A. a consumer has spare income to purchase more wants.

• B. there is a difference in the price a consumer is willing to pay for a good and its market price.

• C. consumers benefit from a decrease in the price of a good.

• D. consumers buy too many goods to satisfy their needs.

Producer surplus is:

• A. when a producer becomes more efficient and produces more goods with the same amount of resources.

• B. the profits left for an entrepreneur when all costs have been deducted.

• C. the difference between what a producer is willing to accept and what is actually paid.

• D. when the price of a good increases unexpectedly.

In the diagram, D is the demand curve for a chocolate bar and S is the initial supply.

An increase in production causes the supply curve to shift to S1.

What is the gain in consumer surplus?

• a + b + e

• b + e + f

• b + c

• d + e

What happen to the producer surplus when demand curve shift to the right?

• A. producer surplus will decrease

• B. producer surplus will increase

• C. producer surplus remain unchanged

• D. producer surplus is gone

How might a seller turn consumer surplus into producer surplus?

• A. through having a unique product

• B. through restricting supply in the market

• C. through identifying a group of consumers who are willing to pay higher prices for the same product

• D. through identifying a group of consumers who are willing to pay lower prices for the same product