Question

What are the impacts of different forms of elasticity of demand on the consumer and producer surplus?

Answer 1

Perfectly Inelastic: consumer surplus is infinite where the producer surplus is zero when the price is inelastic it is because any change in price (price increase or decrease) does not affect its demand

Perfectly Elastic: consumer surplus is zero when demand is perfectly elastic where the producer surplus is infinite because the consumer is willing to match the price of the product i.e any change in supply does not affect the price

Unitary Elastic: in this case consumer surplus is the part from the market price to the willing to pay and producer surplus are equal as market price charge or supplier is willing to sell its good at lowest price

inelastic demand: in this case the potential of consumer surplus is greater as some buyers are willing to pay a higher price to consume that product and the potential of the producer is less.

Elastic demand = in this case producer surplus is higher than the producer surplus