Define Consumer Surplus and Producer Surplus

question 28

Essay

Define consumer surplus and producer surplus. Explain why the equilibrium price and quantity maximizes the sum of producer plus consumer surplus (the total surplus).

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Definitions:

Unionized

A workforce or organization where employees are members of a union which represents their interests in negotiations with management.

Political Party

An organized group of people with at least roughly similar political aims and opinions, that seeks to influence public policy by getting its candidates elected to public office.

Bread-and-Butter

Refers to basic, essential aspects of something, often related to source of income or fundamental needs.

Collective Bargaining

The process in which working people, through their unions, negotiate contracts with their employers to determine their terms of employment.