Question

which of the following will cause an increase in producer surplus? a. the price of a substitute increases b. buyers expect the price of the good to be lower next month c. the imposition of a binding price ceiling in the market d. income decreases

Answer 1

The following will cause an increase in producer surplus is the price of a substitute increases.

What is surplus?
The amount of an asset as well as resource that is over the amount that is being actively used is referred to as a surplus. Income, profits, capital, and goods are just a few of the numerous things that can be referred to as a surplus. A surplus in the context of inventories refers to items that are still unsold and on store shelves. When income is earned and expenses are paid, there is a surplus in a budget. When there is excess tax revenue once all government programmes have been fully funded, governments can also experience a budget surplus. It's not always preferable to have a surplus. For instance, a producer who overestimates future demand for a particular product might produce too many unsold units, which could subsequently contribute to quarterly as well as annual financial losses.

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