Consider the demand for schnitzel in the diagram below Suppo

Consider the demand for schnitzel in the diagram below. Suppose that there is a single seller of schnitzel, who acts as a single- price monopolist.

What are the areas of consumer surplus and producer surplus?

Solution

What are the areas of consumer surplus and producer surplus?

Ans.

DEFINITION of \'Consumer Surplus\'

An economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service relative to its market price. A consumer surplus occurs when the consumer is willing to pay more for a given product than the current market price.

DEFINITION of \'Producer Surplus\'

An economic measure of the difference between the amount that a producer of a good receives and the minimum amount that he or she would be willing to accept for the good. The difference, or surplus amount, is the benefit that the producer receives for selling the good in the market.

In this digram If market price is P3 then ABCDE is consumer surlus & FGHI is producer surplus.