Market Equilibrium and Consumer/Producer Surplus - AP Microeconomics

Total surplus decreases. Taxes create deadweight loss, reducing overall welfare.

Supply increases. Subsidies effectively shift supply curve rightward.

Area above the price level and below the demand curve. Triangle showing benefit from purchasing below maximum willingness.

$Consumer surplus = \frac{1}{2} \times \text{base} \times \text{height}$. Area of triangle above price and below demand curve.

More elastic demand or supply increases deadweight loss. More elastic curves respond more to price changes.

Market equilibrium is where quantity demanded equals quantity supplied. This occurs when market forces balance supply and demand.

$Consumer surplus = \frac{1}{2} \times \text{base} \times \text{height}$. Area of triangle above price and below demand curve.

$Producer surplus = \frac{1}{2} \times \text{base} \times \text{height}$. Area of triangle below price and above supply curve.

The demand curve intersects the supply curve. This intersection point determines equilibrium price and quantity.

Consumer surplus increases. Lower price increases the area between demand curve and price.

Producer surplus decreases. Lower price reduces the area between price and supply curve.

Equilibrium price $P = 10$. Set $50 - P = 2P$ and solve for $P$.

Equilibrium quantity $Q = 20$. Substitute $P = 10$ into either equation to find $Q$.

Producer surplus is the difference between what producers are willing to accept and what they actually receive. It measures the benefit producers receive from selling goods.

An increase in consumer income or preferences. These factors increase willingness to buy at every price level.

An increase in production costs. Higher costs reduce willingness to produce at every price level.

A shortage occurs. Quantity demanded exceeds quantity supplied at the ceiling price.

A surplus occurs. Quantity supplied exceeds quantity demanded at the floor price.

Consumer surplus = $20. Simple subtraction: willingness to pay minus actual price paid.

Producer surplus = $10. Simple subtraction: actual price received minus willingness to accept.

Equilibrium price increases. Higher demand shifts the intersection point upward.

Equilibrium quantity increases. Higher supply shifts the intersection point rightward.

Total surplus decreases. Taxes create deadweight loss, reducing overall welfare.

Area above the price level and below the demand curve. Triangle showing benefit from purchasing below maximum willingness.

Area below the price level and above the supply curve. Triangle showing benefit from selling above minimum acceptance.

There is either a surplus or a shortage. Markets automatically move toward equilibrium through price changes.

Price consumers pay increases. Taxes shift effective supply curve, raising consumer price.

Price producers receive increases. Subsidies effectively increase the price producers receive.

Supply decreases. Taxes effectively shift supply curve leftward.