Producer Surplus Assignment Answers
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In economics, surplus is a concept that students must be well accustomed to. Producer surplus is an aspect of the economic surplus. If you are having any trouble understanding the concept or want some help with producer surplus assignment answers, we can help you out. We have a team of experts who have the required knowledge and experience to provide you the necessary assistance. Whenever you are stuck with your assignment or homework, you can ask our experts for help.
What is producer surplus?
For any producer, there is a certain minimum amount at which they are willing to sell their good. The difference between that amount and the amount the producer actually receives from selling a good is known as producer surplus in economics. Of course, the producer benefits more if the said difference, or surplus, is greater.
It is likely that your producer surplus homework answers would require you to explain things with the help of graph. For that you require knowledge of the supply and demand graph. Of course, if you have trouble with the graphical representation, you can hire our online services anytime.
On the graph, the producer surplus is below the point of intersection of the supply and demand curve, known as the equilibrium point, and above the supply curve. The supply curve also represents the minimum price that is acceptable for the producers. Some major takeaways from the graphical representation include:
- Producer surplus is related directly to change in equilibrium price. There is an increase in potential producer surplus with an increase in equilibrium price. Similarly, there is a decrease in producer surplus with a decrease in equilibrium price
- Producer surplus is also related directly to supply curve shifts. Producer surplus increases and decreases with increase and decrease in supply.
- Demand curve shift also has a direct relation to producer surplus. Increase or decrease in demand increases and decreases producer surplus.
- Producer surplus and price elasticity of supply are inversely related. Producer surplus becomes zero in case of complete elasticity of supply. Similarly, complete elasticity results in infinite producer surplus.
Producer surplus and consumer surplus
For proper preparation of producer surplus assignment answers, you also need to know about the consumer surplus. Both consumer and producer surplus in combination means the overall economic surplus, in case both producers and consumers interact in free market. If producers could perfectly discriminate price, or charge the maximum amount consumer can pay, then the entire economic surplus would be captured by the producer. In that case, the overall economic surplus would be equal to producer surplus.
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