2.5 Consumer and producer surplus

a) With the help of a diagram(s), explain what is meant by consumer surplus and producer surplus and consider whether a fall in the equilibrium price of a product will always reduce the producer surplus.

a) Explain whether consumer surplus always reduce if price of a product increases. [8]

a) With the aid of diagrams, explain how consumer surplus is affected by a decrease in the price of a luxury product with many substitutes, and of an essential product with few substitutes.[8]