CAS EC 101 Study Guide - Final Guide: Economic Surplus, Price Ceiling, Everytime

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Bruce Watson

Document Summary

Section 1: producer & consumer surplus good or service. Consumer surplus is difference between the price a consumer is willing to pay for a. Consumer surplus = value of the good to the consumer - cost to consumer. As the market price decreases, each consumer pays less for the product, therefore increasing the consumer surplus for each consumer. As the market price increases, each consumer pays more for the product, therefore decreasing the consumer surplus for each consumer a good and the minimum amount at which the seller is willing to sell the good. Producer surplus is the difference between the amount that a seller receive from selling. Producer surplus = amount received by sellers - cost to sellers. The effect of price change on producer surplus is the opposite of the effect of price change to consumer surplus. As the market price increases, the producer surplus increases. As the market price decreases, the producer surplus decreases.