We can measure producer and consumer gains by looking at a graph of supply and demand. Total welfare in the economy would be:
A) the area above the supply curve but below the equilibrium price.
B) the area below the demand curve but greater than the equilibrium price.
C) the area below the demand curve all the way down to the quantity axis.
D) the combined triangular area below the demand curve and above the supply curve.

Question

Quizplus · Accepted Answer

Total welfare in the economy can be measured by the combined triangular area below the demand curve and above the supply curve, which represents the gains to both producers and consumers. This area is also known as consumer surplus plus producer surplus. Therefore, the best choice is D.

We Can Measure Producer and Consumer Gains by Looking at a Graph