Answer to Question #230171 in Microeconomics for gemma

Question

Use demand and supply diagrams to illustrate consumer and producer surpluses and explain how to maximize the total surplus (consumer surplus + producer surplus) at an equilibrium level.

Answer 1

The space above the market price and below the demand curve is known as consumer surplus, while the area below the market price but above the supply curve is known as producer surplus.As a result, when the price equals the market equilibrium price, total surplus is maximized.