Micro Foundations · intro
What moves on the Consumer & Producer Surplus diagram
A rightward demand shift raises equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change. quantity, expanding both consumer and producer surplusproducer surplusThe gap between the price sellers receive and the minimum they would have accepted..
Start at equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change..
Buyers value the good more, demand shifts right.
Both CS and PS grow: stronger demand enlarges the total gains from trade.
Examiners ask this as: surplus grows, gains from trade increase, demand rises welfare.
Other scenarios on Consumer & Producer Surplus