Tina imports sesame oil from Ethiopia and sells to a market that has a downward-sloping demand curve.The demand curve indicates that some consumers are willing to pay $1.50 or more per kilogram for the first few kilograms, but every consumer gets to buy at the market-clearing price of $0.50 per kilogram.What is the term for the difference between the highest amount of money that consumers would pay and the actual amount they pay?

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the highest amount of money that consumers would pay for a good or service and the actual price they pay. In this case, some consumers are willing to pay $1.50 per kilogram, but they all end up paying the market-clearing price of $0.50 per kilogram, resulting in consumer surplus. Exporter surplus refers to the difference between the price the exporter receives and the cost of producing the good. Trade balance refers to the difference between a country's exports and imports. Producer surplus is the difference between the actual price received by a producer and the minimum price the producer would have been willing to accept for the good or service.

Tina Imports Sesame Oil from Ethiopia and Sells to a Market