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What is the area below a demand curve and above the price measures?

The area below a demand curve and above the price measures is known as the consumer surplus. It is a measure of the economic benefit that consumers receive from being able to purchase a good or service at a lower price than the maximum amount that they would be willing to pay.

It is the difference between the amount of money consumers would be willing to pay and what they actually pay. The consumer surplus increases as the difference between the price consumers pay and their willingness to pay increases.

This occurs when the price falls below a consumer’s reservation price, that is, the maximum amount a consumer would pay for a good or service. The increase in consumer surplus is a result of economies of scale that enable producers and suppliers to reduce the cost of production, thus enabling them to sell their goods or services at a reduced cost.

What is the area under the demand curve?

The area under the demand curve is the total market demand for a good or service. It is calculated by taking the sum of the products of the quantity demanded at each price point and the corresponding price of the good or service.

This area under the demand curve reflects the total amount that consumers are willing to pay collectively for a given quantity of the good or service. In essence, it is the total value that consumers attach to the good or service.

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The area under the demand curve is a useful tool for both consumers and producers. On the consumer side, the area can be used to understand the total spending they are willing to allocate to a given product.

For producers, it is useful in understanding the total market potential that exists for their product. This can help them understand how much to produce and what the optimal price should be. It can also be useful in understanding the impact of pricing changes on the overall demand curve.

What is the term for the area above the supply curve and below equilibrium price?

The area above the supply curve and below equilibrium price is known as the “producer surplus. ” This refers to the additional benefit that producers receive when they are able to sell their product at a price higher than the equilibrium or market price.

With higher prices, producers are able to increase their profit margins on each product sold – resulting in increased revenue overall. Producer surplus can be illustrated by the area between the supply curve and the equilibrium price, with the height of the area representing the additional benefit the producers are receiving.

This concept is also sometimes referred to as “economic rent. “.

What does the area above the equilibrium price and below the demand curve represent quizlet?

The area above the equilibrium price and below the demand curve represents the consumer surplus. This is the additional amount of money that consumers are willing to pay for a good or service above the market price.

It reflects the willingness of consumers to pay for a good or service and the value that they attach to it. Consumer surplus is the difference between what consumers are willing to pay for a product or service and what they actually pay.

It can also be thought of as the total benefit that the consumer receives from consuming that product or service.

What does the demand curve given below show?

The demand curve given below shows the relationship between price and quantity of a good or service demanded. The demand curve typically slopes downward, as it demonstrates that as the price of a good or service increases, the demand for it decreases.

This relationship reflects a basic tenet of economics: when the cost of a product or service rises, the demand for it falls. The demand curve also demonstrates that there is a point at which an increase in price will no longer lead to a decrease in demand.

This point of “elasticity” varies depending on the good or service in question.

What do you call the midpoint of supply and demand?

The midpoint of supply and demand is known as the market equilibrium. In economics, this is the point at which the quantity of goods that buyers are willing and able to purchase (demand) is equal to the quantity of goods that sellers are willing and able to provide (supply).

At this equilibrium point, there is no excess supply or excess demand, which means that prices remain stable. This can be represented graphically, with prices on the vertical axis and quantity on the horizontal axis, as a point where the demand curve and the supply curve intersect, showing the equilibrium price (p*) and equilibrium quantity (Q*).

Any movement away from this point will trigger a shift in the market equilibrium and a change in prices.

What happens when there is a price above equilibrium and below equilibrium?

When there is a price above equilibrium, it creates a surplus as the quantity supplied exceeds the quantity demanded. In this case, the market has too many goods and not enough buyers, so suppliers will generally reduce the prices in order to entice buyers and try to bring the market back to equilibrium.

On the other hand, when there is a price below equilibrium, it creates a shortage as the quantity demanded exceeds the quantity supplied. This type of market has too few goods and too many buyers, so suppliers will generally raise the prices in order to make the goods more scarce and try to bring the market back to the equilibrium.

In either situation, the market is “out of equilibrium” until the price is brought back to the equilibrium price and the quantity supplied matches the quantity demanded.

What happens when the equilibrium price is above the price ceiling?

When the equilibrium price is above the price ceiling, it means that the prices that sellers are allowed to charge for goods and services has been artificially limited. This can cause problems for the market, because buyers will not be willing to buy the items at the lower price being offered, and sellers will have to lower their profits significantly or even lose money in order to be able to sell their goods.

This situation is not sustainable for either party, since buyers can find better deals elsewhere, and there isn’t enough incentive for sellers to remain in the market. In situations like this, sellers may leave the market or find ways to circumvent the price ceiling, while buyers may start to look for alternative markets.

Ultimately, when the equilibrium price is above the price ceiling, it can cause an imbalance in the market and possibly even a shortage of goods.

What area above represents consumer surplus at equilibrium?

Consumer surplus at equilibrium is the difference between the consumer’s willingness to pay for a good or service, and the actual price they pay for it. It is the benefit enjoyed by consumers when they are able to purchase goods and services at a lower price than what they are willing to pay for them.

The area above the equilibrium price in the demand and supply diagram represents consumer surplus at equilibrium. It measures the total consumer benefit derived from consumer purchases, and is equal to the difference between the maximum amount consumers are willing to pay for a good or service, and the amount they actually pay for it.

As the diagram shows, the consumer surplus is the area above the equilibrium price (the market-clearing price), and below the demand curve.

Is the price floor above the equilibrium point?

No, the price floor cannot be placed above the equilibrium point. A price floor is the lowest legal price that a product or service can be sold at, and it must be set at or below the equilibrium point in order to be effective.

If the price floor is set above the equilibrium point, it will have no impact on the market because it will not be binding. Instead, the price that buyers and sellers agree on in the market would simply be at or above the price floor and there would be no incentive to trade at the price floor.

In other words, if the price floor is above the equilibrium point, it becomes ineffective and thus pointless to have.

Where is surplus on a graph?

Surplus is generally represented on a graph by the area of the graph that is above the equilibrium price. This area is referred to as the “consumer surplus. ” It is the area between the demand curve and the equilibrium price.

For example, if the equilibrium price is P, any price above P would create a surplus and would be represented by the area between the demand curve and the price P. This area is the consumer surplus as purchasers are able to buy the good at a lower price than they’d be willing to pay.

The consumer surplus is beneficial to buyers as it keeps the price lower than it would be if the demand for the good was greater than the supply.

How do you know if a graph is demand elastic or inelastic?

One way to determine if a graph is demand elastic or inelastic is to look at the shape of the curve. If the curve is relatively flat, this is an indication that the demand is relatively inelastic. This is because when demand is inelastic, the quantity demanded does not significantly change when there is a variation in price.

On the other hand, if the curve is steep, this is an indication that the demand is elastic. Demand is elastic when a change in price leads to a significant change in quantity demanded. This can be seen on graphs because a steep/vertical curve indicates that there is a higher sensitivity to price changes.

Essentially, the steepness of the curve can be used to determine if a graph is demand elastic or inelastic. A flat curve indicates inelastic demand and a steep curve indicates elastic demand.

Resources

  1. Consumer surplus is measured as the area – Study.com
  2. Solved On a graph, the area below a demand curve and above
  3. Microeconomics 110 Exam 1.3 Flashcards | Quizlet
  4. Consumer Surplus Definition, Measurement, and Example
  5. Principles of Microeconomics (ACTS Equivalency = ECON …