Name: Worksheet 6: Consumer Surplus, Producer Surplus and Economic Efficiency 1. Use the diagram of the demand curve below to answer the following questions. Figure 4.16 Price A D Demand Q2 Quantity a. What is the maximum amount that the consumer is willing to pay for Q, units? b. What is the consumer's total expenditure on Q, units? c. What is the area that represents the consumer surplus at price P,? d. What is the increase in consumer surplus when price falls from P, to P,? e. What portion of this increase in consumer surplus represents the gains of those who would have bought at the original price, P2? f. What portion of the increase in consumer surplus represents the gains to consumers who are persuaded to buy by the lower price, P, ?Name: 4 Pag 2. Use the diagram of the supply curve below to answer the following questions. Figure 4.17 Price Supply P A B P E Q2 Quantity a. What is the minimum amount the supplier requires in order to produce Q, units? b. If a seller is able to sell Q, units, what is total sales revenue? c. What is the producer surplus at price P,? d. What is the increase in producer surplus when price rises from P, to Pz? e. What portion of this increase represents the gains of those producers who would have supplied the good even at the original, lower price, P,? f. What portion of the increase in producer surplus represents the gains of those who are induced to supply the good by the higher price, P2? 47 Economic Efficiency, Government Price Setting, and Taxes