Differentiate between consumer’s surplus and producer’s surplus. For a rational consumer, consumer’s surplus will never be a negative number. Why?
What will be an ideal response?
The consumer’s surplus from a purchase is equal to the difference between the maximum amount the consumer would be willing, if necessary, to pay for the item bought, and the price that the market actually charges. The producer’s surplus from a sale is the difference between the market price of the item sold and the lowest price at which the supplier would be willing to provide the item.A rational consumer will leave the market without purchasing any amount of output if the market price is higher than the maximum price, which he or she is willing to pay for.
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The Fed's purchases and sales of government securities are called: a. margin operations
b. open market operations. c. small-dealer transactions. d. intermediary transactions.