Page K of 2 ZOOM 4 With more students now attending college

Page K of 2 ZOOM 4. With more students now attending college, the demand for textbooks has risen. Use the graph below to answer questions a. through c. What is the change in consumer surplus due to the increase in demand? a. b. What is the change in producer surplus due to the increase in demand? PI D2 Di Q1 c. True or False? Total surplus has increased because of the increased demand and society is better off. Explain. 6 ait 9 alt

Solution

a. The level of consumer surplus changes depending on the market price of the goods and services.

An increase in market demand causes consumer surplus to rise from area P1AD to area P2PD.

b. The level of producer surplus is determined by the market price of goods and services.

An increase in market demand leads to higher price and rise in producer surplus from area P1DE to area P2DF.

(c) False total surplus depends in both cosumer surplus and producer surplus. Both demand and supply are important. Not only demand can decide the total surplus.