Economics Consumer Surplus And Producer Surplus Questions Medium
A change in supply can have a significant impact on consumer surplus. Consumer surplus refers to the difference between the price consumers are willing to pay for a good or service and the actual price they pay.
When there is an increase in supply, meaning that more of the good or service is available in the market, it generally leads to a decrease in price. This decrease in price benefits consumers as they are able to purchase the good or service at a lower cost. As a result, consumer surplus increases.
On the other hand, a decrease in supply, indicating that less of the good or service is available, tends to lead to an increase in price. This increase in price reduces consumer surplus as consumers have to pay more for the same quantity of the good or service.
In summary, an increase in supply leads to a decrease in price and an increase in consumer surplus, while a decrease in supply leads to an increase in price and a decrease in consumer surplus.