Question

1

Consumer surplus is defined as the:
	gap between the supply curve and the market price. difference between a price ceiling and the market price. difference between a price floor and the market price. gap between the demand curve and the market price.

2. graph

Mackenzie's demand for gasoline is shown in the graph provided.

Part 1: The current price is $3.00 per gallon. Use the double drop line tool to indicate the current price and quantity combination. Label this point "a."

Part 2: Use the area tool to identify Mackenzie's consumer surplus and label this area "CS."

3.graph

The following graph shows the demand and supply for laptops with an equilibrium price of $1,000. Suppose that, due to unrealistic expectations of demand, prices for laptops are set at $1,400. Part 1: Use an area tool to identify the change in consumer surplus that comes from preventing some consumers from purchasing the laptops. Label this area "CS1." Part 2: Use an area tool to identify the change in consumer surplus that comes from consumers who still purchase laptops. Label this area "CS2."

4.

Producer surplus is defined as the:

	difference between a price floor and the market price.
	difference between a price ceiling and the market price.
	gap between the demand curve and the market price.
	gap between the supply curve and the market price.

Answer 1

1. Consumer surplus is defined as the:

Answer: Gap between the demand curve and the market price.

Consumer Surplus is defined as the area below the demand curve and above the market price.

Part 1. The current price is $3.00 per gallon. We can draw this situation.

Part 2:

Due to higher price of laptops the consumer surplus falls from the area of ADE to the area of ABC and hence the change in consumer surplus that comes from preventing some consumers from purchasing the laptops is shown by the area BCDE. Hence this area is known as CS1.

Also, the change in consumer surplus that comes from consumers who still purchase laptops​​​​​​​, is shown by the area of ABC. Hence this area is known as CS2.

4. Producer surplus is defined as the:

Gap between the supply curve and the market price.

It is the area above the supply curve and below the market price level.