Asked by Jordan Cornelius on May 09, 2024
Verified
If total surplus rises,there may have been a(n) _____ in demand or a(n) _____ in supply.
A) increase;decrease
B) increase;increase
C) decrease;decrease
D) decrease;increase
Total Surplus
The sum of consumer and producer surplus, measuring the total net benefit to society from trading a good or service.
Supply
The total amount of a specific good or service that is available to consumers, typically influenced by the price level, production costs, and other factors.
- Understand and analyze the relationship between supply, demand, and total surplus.
Verified Answer
AM
Alice McCalister-HamptonMay 13, 2024
Final Answer :
B
Explanation :
If total surplus (consumer surplus + producer surplus) rises, it means there has been an increase in the quantity exchanged. This increase in quantity could be due to an increase in demand, an increase in supply, or both. However, if total surplus increases, at least one of the following must be true: either consumer surplus has increased or producer surplus has increased. An increase in consumer surplus could be due to an increase in demand or a decrease in price, while an increase in producer surplus could be due to an increase in supply or an increase in price. Therefore, an increase in total surplus could be due to an increase in demand or an increase in supply. Choice B is the only option that includes an increase in both demand and supply, which is one possible explanation for an increase in total surplus.
Learning Objectives
- Understand and analyze the relationship between supply, demand, and total surplus.