Test 3 Review

____ surplus is the area below the demand curve and above the price line.

*Consumer surplus* is the area below the demand curve and above the price line.

____ surplus is the area above the supply curve and below the price line.

*Producer surplus* is the area above the supply curve and below the price line.

_____ is the value received by consumers that is in excess of the price they pay.

Consumer surplus

Consumer surplus can be measured if the ____ is known.

Consumer surplus can be measured if the *demand curve* is known.

*Figure 6.1* shows hypothetical market demand and supply curves for milk. Determine the producer surplus.

Consumer surplus is the area *above the supply curve and below the price line* or the area of the triangle given by the formula (1/2)*(height)*(width) (1/2)*($3.20-$1.50)*(10,000)=$8,500 (1/2)*($1.70)*(10,000)=$8,500

*Figure 6.1* shows hypothetical market demand and supply curves for milk. Determine the consumer surplus.

Consumer surplus is the area *below the demand curve and above the price line* or the area of the triangle given by the formula (1/2)*(height)*(width) (1/2)*($4.50-$3.20)*(10,000)=$6,500 (1/2)*($1.30)*(10,000)= $6,500

Since the demand curve is a summary of the value that each consumer places on a particular good, the area between the demand curve and the price line is a measurement of ____.

Since the demand curve is a summary of the value that each consumer places on a particular good, the area between the demand curve and the price line is a measurement of *consumer surplus.*