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AP Economics

AP Economics. Mr. Bernstein Module 49: Consumer and Producer Surplus October xx, 2013. AP Economics Mr. Bernstein. Consumer Surplus The difference between what a consumer is willing to pay for a good or service and what they actually have to pay. AP Economics Mr. Bernstein.

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AP Economics

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  1. AP Economics Mr. Bernstein Module 49: Consumer and Producer Surplus October xx, 2013

  2. AP EconomicsMr. Bernstein Consumer Surplus • The difference between what a consumer is willing to pay for a good or service and what they actually have to pay

  3. AP EconomicsMr. Bernstein Willingness to Pay • Willingness to Pay is found along the demand curve • Purchases that can be made at lower prices create a net gain in happiness for the consumer; measured in dollars we call it Consumer Surplus

  4. AP EconomicsMr. Bernstein Calculating Consumer Surplus • The area below the demand curve or WTP line and above the price • Area = ½ base * height

  5. AP EconomicsMr. Bernstein Producer Surplus • The difference between what a producer must receive to sell a unit and the actual price they receive

  6. AP EconomicsMr. Bernstein Cost and Producer Surplus • Producer Cost is found along the supply curve • Producer Surplus is the difference between price and the cost of producing a unit

  7. AP EconomicsMr. Bernstein Calculating Producer Surplus • The area above the supply curve and below the price • Area = ½ base * height

  8. AP EconomicsMr. Bernstein Changes in Price Affect Consumer and Producer Surplus • If price decreases: • Consumer surplus increases(willingness to pay is the same, but the price paid is lower) • Producer surplus decreases (costs are the same but price received is lower) • If price increases: • Consumer surplus decreases (willingness to pay is the same but the price paid is higher) • Producer surplus increases (costs are the same but the price received is higher)

  9. AP EconomicsMr. Bernstein Total Surplus = Consumer Surplus + Producer Surplus

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