a. Consumer surplus: Consumers are willing to pay a certain amount for a good or service. The variance in that price is considered consumer surplus. When the price is less than they are willing to pay, the amount (or quantity) of that good or service increase. When the price is higher than they are willing to pay, the amount (or quantity) of that good or service decreases. An example of consumer surplus is as follows: Consumers are willing to pay $1.00 for tuna fish. Tuna fish is currently on sale for $0.75 per can. Consumers are more likely to purchase more of the tuna fish at $0.75. However, if the tuna fish was $1.25 per can, they are less likely to purchase the tuna fish, and if they do, it will be at reduced quantities.
b. …show more content…
If the producer will receive more money than they are willing to receive for a good or service, they will produce more of the product or service. If the producer will receive less money for a good or service they produce than they are willing to receive, they will produce less of it. For Example: If my company will accept $50.00 per pipe collar repair and a customer is willing to pay $75.00, than I will be willing to make the repairs, as well as, I will want to make more repairs. However, if a customer is only willing to pay $25.00, than I will be less likely to want to make the repair. It is quite possible, I will not want to make the repair at all.
c. Total welfare:
Total welfare mixes together both consumer surplus and producer surplus. It shows the total benefits of consumers purchases goods or services below the price they are willing to pay, while showing the total benefits of producers selling products and services at higher prices.
d. Deadweight loss
Deadweight losses happen within a market when a consumer surplus or a producer surplus cannot be created. When a market cannot reach an equilibrium due to various factors, it makes the market unbalanced. Some possible contributors to deadweight losses are taxation, monopolies, minimum wages, price ceilings and price floors (Sexton,
b. …show more content…
If the producer will receive more money than they are willing to receive for a good or service, they will produce more of the product or service. If the producer will receive less money for a good or service they produce than they are willing to receive, they will produce less of it. For Example: If my company will accept $50.00 per pipe collar repair and a customer is willing to pay $75.00, than I will be willing to make the repairs, as well as, I will want to make more repairs. However, if a customer is only willing to pay $25.00, than I will be less likely to want to make the repair. It is quite possible, I will not want to make the repair at all.
c. Total welfare:
Total welfare mixes together both consumer surplus and producer surplus. It shows the total benefits of consumers purchases goods or services below the price they are willing to pay, while showing the total benefits of producers selling products and services at higher prices.
d. Deadweight loss
Deadweight losses happen within a market when a consumer surplus or a producer surplus cannot be created. When a market cannot reach an equilibrium due to various factors, it makes the market unbalanced. Some possible contributors to deadweight losses are taxation, monopolies, minimum wages, price ceilings and price floors (Sexton,