Explain the concepts of consumer surplus, producer surplus, and ...

[EY67]

Explain the concepts of consumer surplus, producer surplus, and cooperative surplus.
 
  What will be an ideal response?

Question 2

In 2012, the U.S. federal government budget had a budget deficit. If there is no Ricardo-Barro effect, this deficit ________ the demand for loanable funds and ________ the real interest rate.
 
  A) decreased; lowered
  B) did not change; did not change
  C) increased; raised
  D) decreased; raised
  E) increased; lowered

[TheDev123]

Answer to Question 1

Consumer surplus refers to the maximum amount a buyer would be willing to pay for a good or service less the price he or she actually pays. Producer surplus refers to the amount a seller receives for a good or service beyond the minimum he or she would be willing to sell the good for. Cooperative surplus is the sum of all the net benefits received by the parties to a transaction, so it is the sum of consumer surplus and producer surplus.

Answer to Question 2

C