How are is consumer and producer suplus shown on a diagram of supply and demand? How are both the division and amount of total surplus determined?

Starting with the curves themselves, we have a downward sloping demand curve as more people are willing to buy at lower prices. Conversely, seller will be willing to offer more goods for sale as the price increases which gives rise to an upward sloping supply curve. The intersection of these two represents the market equilibrium, giving optimal quantities and priced. [Draw simple diagram of supply and demand curve intersection, with surplus areas shaded]Total quantity is the key factor in determining total surplus, as for each unit traded there will be some surplus going to either the consumers or producers. However, it is the price paid that determines how the total surplus is divided - although implicitly, the price will affect quantity in equilibrium and hence total surplus. [Draw example of monopoly pricing with market power]

JL
Answered by Joshua L. Economics tutor

1477 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Assess how important government policies, other than taxation, are to a business when deciding where to locate its operations. (12)


Explain two government policies which could reduce a deficit on the current account of the balance of payments.


Explain what you understand by the Lorenz Curve and Gini Coefficient.


Discuss the view that falling unemployment will inevitably lead to trade-offs with other macroeconomic policy objectives


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences