Answer :
If the price paid and received is $4, the maximum buying price is $20, and the minimum selling price is $2, then consumers' surplus is equal to 16 dollars and producers' surplus is 2 dollars.
What is consumer surplus?
- Consumer surplus, which is a gauge of consumer welfare, is the distinction between a product's social value and the price that was actually paid.
- Using the area of a triangle that is above the reported price and below a demand curve, it can be determined.
- Economically, the term "consumer surplus" or "buyer's surplus" refers to the excess benefit received by a customer.
- It is calculated using the equilibrium price, also referred to as the price at which consumers are willing to purchase a good.
- The law of declining marginal utility states that a good's overall utility exceeds its total market value; any excess utility is referred to as consumer surplus. This is because consumers would be willing to pay the market price even at the lowest utility level.
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