Sapling Chapter 4 HW Flashcards

Study Notes

Total consumer surplus for five students is $800 at a price of $150 for a tablet.
If the tablet's price rises to $350, total consumer surplus decreases by $600.

Consumer surplus is the difference between the maximum price a buyer is willing to pay and the actual market price.
Graphically, consumer surplus is represented as the area under the demand curve and above the market price.

Producer surplus is defined as the difference between the market price and the minimum price a seller is willing to accept.
Graphically, producer surplus appears as the area above the supply curve and below the market price.

Alice's consumer surplus is $5 after purchasing jeans priced at $35 with a $10 coupon.
Jeff's consumer surplus is $16 after purchasing steaks initially priced at $20 but discounted heavily.
Nicole's producer surplus is $0 from selling a hockey puck; the last bid meets her minimum price.
Claire earns a producer surplus of $25 selling a calculus textbook for $125, being willing to sell for $100.
Roy has a consumer surplus of $0 because he does not purchase a drink priced higher than his willingness to pay.

The determined equilibrium number of flush toilets is 4.
Total surplus at this equilibrium point is $60.
Managers will install the determined number of flush toilets since the total surplus exceeds the $50 threshold.

Teuber and Mayflair have different willingness to pay for wood ($50 and $45 respectively) while TIMBER sets the price at $60, leading to no trade and zero change in total surplus.
Klaus sells wood to Mayflair for $40 instead of Teuber for $45, leading to an increase in total surplus although the market remains inefficient.