Assignment 1: Consumer Surplus

“Consumer surplus” represents the difference between what a consumer is willing to pay for a good or service and the price that they actually pay.
In other words, the concept of consumer surplus indicates how much consumers gain from consuming goods and services at a specified price.
Now let’s consider the case of a “consumer deficit” or the loss represented by consumers who exist at the opposite end of the demand curve.
These are those persons who cannot afford to consume any goods or services at the specified price.
To address such a consumer loss, imagine that you are now tasked with imposing a “surplus tax” on consumers through the addition of an individual sales tax which will be added to the market price of certain goods and services. The proceeds from such a tax will be used to compensate an equal number of those consumers at the bottom of the demand curve, thereby, giving them the opportunity to consume such goods and services which they otherwise would not have been able to purchase at the specified price.
What would be the various consequences of this tax on both consumption as well as production?

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In your response, provide examples and analysis to justify your conclusions. Quotations, paraphrases, and ideas you get from books, articles, or other sources of information should be cited using APA style. Help with citing sources can be found through the Academic Resources page under the Help menu .
By the due date assigned, post your initial response in the Discussion Area below. Through the end of the module, read all of the other students’ submissions, and post substantive comments to at least two classmates.

SAMPLE SOLUTION

Assignment 1: Consumer Surplus
Effects of Imposing Surplus Tax on Production and Consumption
Surplus tax is levied on good or service where consumer surplus is experienced. Consumer surplus refers to the difference between the price final consumers are willing to pay and the market price of such goods | PLACE YOUR ORDER NOW AT studenthelp.contentfence.com | price charged in the market is lower than what consumers are willing to pay (Varian, 2014). On the other hand, consumer deficit is experienced when the price charged in the marketplace is higher…