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▼surplus is the difference between the highest price a consumer is willing pay and the price the consumer actually pays. This component of economic surplus illustrated in the diagram by area B с Quantity (per time period) Do Q Q

▼surplus is the difference between the highest price a consumer is willing pay and the price the consumer actually pays. This component of economic surplus illustrated in the diagram by area B с Quantity (per time period) Do Q Q

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consumer surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area A. The diagram on the right is a standard supply and demand graph. It shows: - **Demand Curve (\(D_0\))**: A downward-sloping line indicating the relationship between price and quantity demanded. - **Supply Curve (\(S_0\))**: An upward-sloping line representing the relationship between price and quantity supplied. - **Price and Quantity Axes**: The y-axis (vertical) is labeled "Price" and the x-axis (horizontal) is labeled "Quantity (per time period)." The areas are marked as follows: - **Area A (Consumer Surplus)**: The upper triangle between the demand curve and price level, representing the consumer surplus. - **Area B**: Directly below area A. - **Area C**: Below area B on the same horizontal line, typically representing producer surplus. The intersection of the demand and supply curves indicates the equilibrium price and quantity.
Transcribed Image Text:Consumer surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area A. The diagram on the right is a standard supply and demand graph. It shows: - **Demand Curve (\(D_0\))**: A downward-sloping line indicating the relationship between price and quantity demanded. - **Supply Curve (\(S_0\))**: An upward-sloping line representing the relationship between price and quantity supplied. - **Price and Quantity Axes**: The y-axis (vertical) is labeled "Price" and the x-axis (horizontal) is labeled "Quantity (per time period)." The areas are marked as follows: - **Area A (Consumer Surplus)**: The upper triangle between the demand curve and price level, representing the consumer surplus. - **Area B**: Directly below area A. - **Area C**: Below area B on the same horizontal line, typically representing producer surplus. The intersection of the demand and supply curves indicates the equilibrium price and quantity.
[Consumer] surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. [Consumer] economic surplus is illustrated in the diagram by area [Consumer]. *Dropdown Options:* 1. Government 2. Consumer 3. Producer
Transcribed Image Text:[Consumer] surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. [Consumer] economic surplus is illustrated in the diagram by area [Consumer]. *Dropdown Options:* 1. Government 2. Consumer 3. Producer
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