Differentiate between consumer’s surplus and producer’s surplus. For a rational consumer, consumer’s surplus will never be a negative number. Why?
What will be an ideal response?
The consumer’s surplus from a purchase is equal to the difference between the maximum amount the consumer would be willing, if necessary, to pay for the item bought, and the price that the market actually charges. The producer’s surplus from a sale is the difference between the market price of the item sold and the lowest price at which the supplier would be willing to provide the item.A rational consumer will leave the market without purchasing any amount of output if the market price is higher than the maximum price, which he or she is willing to pay for.
You might also like to view...
All of the following are considered natural resources EXCEPT
A) a redwood forest. B) labor. C) gold. D) a coral reef.
The above figure depicts an economy
A) with an inflationary gap. B) with a recessionary gap. C) producing at full employment. D) None of the above answers is correct.
Chinese exports of toys and footwear can be explained by factor endowments, while Chinese exports of telecommunications equipment and computers and accessories can be explained by product-cycle analysis
Indicate whether the statement is true or false
Some individuals would like to have a job, but they have given up looking for a job after an unsuccessful search. These individuals are called
a. detached workers, and they are classified by the Bureau of Labor Statistics as unemployed. b. detached workers, and they are not classified by the Bureau of Labor Statistics as unemployed. c. discouraged workers, and they are classified by the Bureau of Labor Statistics as unemployed. d. discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed.