Question

clearly distinguish between the concept of consumer surplus and producer surplus, use a graph to iilustrate your answer.

(Hint: clearly indicate the consumer surplus and producer surplus on the graph.)

Answer 1

Consumer surplus is the difference between what the consumer is willing to pay for a good or service and the actual price paid by them.

Producer surplus is the difference between the amount that the seller is paid for a good or service and the seller's actual cost.