assume that the market for a good is in equilibrium, with an upward-sloping market supply curve and a downward-sloping demand curve. if government sets an effective price floor and buys up the entire resulting surplus, what happens to the consumer surplus and producer surplus in the market? consumer surplus producer surplus

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04-11-2022
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assume that the market for a good is in equilibrium, with an upward-sloping market supply curve and a downward-sloping demand curve. if government sets an effective price floor and buys up the entire resulting surplus, what happens to the consumer surplus and producer surplus in the market? consumer surplus producer surplus

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smecloudbird18 smecloudbird18 · Answer 1 · 2022-11-08T20:19:18-05:00

Consumer surplus will decrease and producer surplus will increase. A shift in the demand curve upward or to the right will result in both an increase in the equilibrium price and an increase in the equilibrium quantity.

Because the supply curve is equilibrium upward sloping in the case of a moving demand curve. The difference between the market price and the lowest price a producer will accept to create a good is known as the producer surplus. Consumer surplus is the difference between the maximum price a consumer is prepared to pay and the cost of the good. Profit from selling a good is the same as producer surplus.

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