Consumer and Producer Surplus

Read this article and attempt several practical problems related to consumer and producer surplus by answering the "Try It" quiz questions. Check your answers after you're done.

7. TRY IT

7.1. Answers to Try It

1.

    • $6,000
      Incorrect The producer surplus is the area above the supply curve below the market price ($3). The area is [$(3-1) x 2000 ]/2= $2,000. Make sure you use the right formula to calculate the producer surplus. Don't confuse it with the social surplus that is the area below the demand curve and above the supply curve or the producer surplus + the consumer surplus..
    • $2,000
      Correct The producer surplus is the area above the supply curve below the market price ($3). The area is [$(3-1) x 2000 ]/2= $2,000.
    • $4,000
      Incorrect The producer surplus is the area above the supply curve below the market price ($3). The area is [$(3-1) x 2000 ]/2= $2,000. Make sure you use the right formula to calculate the producer surplus. Don't confuse it with the consumer surplus that is the area below the demand curve and above the market price line.

2.

    • $4,000
      Incorrect The social surplus is the area area below the demand curve and above the supply curve or the producer surplus + the consumer surplus. Make sure you use the right formula to calculate the producer and consumer surplus.
    • $12,000
      Incorrect The social surplus is the area area below the demand curve and above the supply curve or the producer surplus + the consumer surplus. Make sure you use the right formula to calculate the producer and consumer surplus.
    • $6,000
      Correct. The social surplus is the area area below the demand curve and above the supply curve or the producer surplus + the consumer surplus.($3). The producer surplus is [$(3-1) x 2000]/2= $2,000. The consumer surplus is [($7-3) * 2000] 12 = $4000. The social surplus = $6,000