How are is consumer and producer suplus shown on a diagram of supply and demand? How are both the division and amount of total surplus determined?

Starting with the curves themselves, we have a downward sloping demand curve as more people are willing to buy at lower prices. Conversely, seller will be willing to offer more goods for sale as the price increases which gives rise to an upward sloping supply curve. The intersection of these two represents the market equilibrium, giving optimal quantities and priced. [Draw simple diagram of supply and demand curve intersection, with surplus areas shaded]Total quantity is the key factor in determining total surplus, as for each unit traded there will be some surplus going to either the consumers or producers. However, it is the price paid that determines how the total surplus is divided - although implicitly, the price will affect quantity in equilibrium and hence total surplus. [Draw example of monopoly pricing with market power]

Answered by Joshua L. Economics tutor

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