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Consumer Surplus
35 P = 35
D
0 400
Consumer Surplus and A Price Increase
35
D
0 270 400
Producer Surplus
The sellers cost: the lowest price a seller is
willing to accept for a good: (marginal cost of
production)
Producer surplus: the difference between the
(market) price a seller actually receives and
his/her (sellers) cost
A seller would not sell below his/her cost
If the market price is below a sellers cost the
seller will leave the market
Producer Surplus and The Market Supply
P Producer surplus = 6750
S
60 P = 60
Producer
Surplus
10
0 270
Total Surplus
S
100
Consumer
Surplus
60
Producer
Surplus
10 D
0 270
Taxes and Consumer and Producer Surplus
Loss of consumer surplus: A+B Tax revenue: A + C
Loss of producer surplus: C+F Deadweight loss: B +F
S
100
K S
85
A B
60
C F
30
L
10 D
Q
0 100 270