Answer to Question #236931 in Economics of Enterprise for tee

Question

Use a diagram to distinguish between the consumer surplus and the producer surplus. (5) 

Answer 1

The difference between what a customer is willing to pay and what they actually pay for a product or service is known as consumer surplus. The gap between the actual price of a good or service–the market price–and the lowest price a producer would be prepared to pay for a good is known as the producer surplus.