Answer to Question #290637 in Microeconomics for Fazi

Question

What is consumer surplus? How is it related to the demand curve?

What is producer surplus? How is it related to the supply curve?

Answer 1

$a)$

Consumer surplus is a measure of consumer welfare that is defined as the difference between the product's social value and the price paid. It is measured by the area of a triangle below a demand curve and above the observed price.

$b)$

The difference between how much a person would accept for a given quantity of a thing and how much they can obtain by selling the good at market price is known as producer surplus. The profit received by the producer for selling the good in the market is the difference, or excess amount. Producer surplus is measured as the area above the supply curve and below the market price between the origin and the quantity sold.