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Consumer Surplus and Producer Surplus 1

When supply and demand curves intersect, the market reaches equilibrium. At the equilibrium point, the quantity demanded equals the quantity supplied, and the price is the equilibrium or market-clearing price. Consumer surplus is measured as the area below the demand curve but above the market price, representing value consumers gain from purchasing goods at a price lower than what they are willing to pay. Producer surplus is measured as the area above the supply curve but below the market price, representing value producers gain from selling goods at a price higher than their costs. The equilibrium price balances the interests of both consumers and producers in the market.

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Carlo Lopez Cantada
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121 views34 pages

Consumer Surplus and Producer Surplus 1

When supply and demand curves intersect, the market reaches equilibrium. At the equilibrium point, the quantity demanded equals the quantity supplied, and the price is the equilibrium or market-clearing price. Consumer surplus is measured as the area below the demand curve but above the market price, representing value consumers gain from purchasing goods at a price lower than what they are willing to pay. Producer surplus is measured as the area above the supply curve but below the market price, representing value producers gain from selling goods at a price higher than their costs. The equilibrium price balances the interests of both consumers and producers in the market.

Uploaded by

Carlo Lopez Cantada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Market & Welfare

Market Equilibrium

When the supply and demand curves intersect, the market is in equilibrium. This is
where the quantity demanded and quantity supplied are equal. The corresponding
price is the equilibrium price or market-clearing price, the quantity is
the equilibrium quantity.
Market & Welfare
Buyer Willingness to pay
Carlo Php 100
Ryle Php 80
Mark Php 70
Rex Php 60
Justine Php 50
Price Buyers Quantity
Demanded
More than Php 100 None 0
Php 80 – Php 100 Carlo 1
Php 70 – Php 80 Carlo & Ryle 2
Php 60 – Php 70 Carlo, Ryle & Mark 3
Php 50 – Php 60 Carlo, Ryle, Mark & Rex 4
Php 50 or less Carlo, Ryle, Mark, Rex & 5
Justine
(b) Price = $70
Price of
Mayo

$100
Carlo’s consumer surplus (Php20)
80

70

50

Demand

0 1 2 3 3 Quantity of
Mayo
(a) Price = $80
Price of
Mayo

$100
Carlo’s consumer surplus (Php30)
80
Ryle’s consumer
70 surplus (Php10)

Total
50 consumer
surplus (Php40)

Demand

0 1 2 3 3 Quantity of
Mayo
• The area below the demand curve and above
the price measures the consumer surplus in
the market
How price affects consumer surplus
Video
Seller Cost
Mang Kanor Php 500
Jude Bochog Php 400
Sir Aids Php 300
Price Sellers Quantity
Demanded
Php 500 or more Mang Kanor, Jude Bochog 3
& Sir Aids
Php 400 – Php 500 Jude Bochog & Sir Aids 2
Php 300 – Php 400 Sir Aids 1
Less than Php 300 None 0
Graph
• The area below the price and above the
supply curve measures the producers surplus
How the price affects producer surplus
Video
Graph
Graph

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