Final answer:
Consumer surplus increases at lower prices due to consumers paying less than their maximum willingness to pay and broader market access enabling more consumers to purchase the product. When consumer demand exceeds supply, prices rise, eventually bringing new suppliers into the market and increasing producer surplus. Imposing trade barriers raises prices and reduces consumer surplus while increasing producer surplus.
Step-by-step explanation:
The topic at hand concerns the concept of consumer surplus and producer surplus in the field of microeconomics. All else held constant, at lower prices, consumer surplus increases because consumers are getting the goods for less than what they are willing to pay, and thus they derive extra satisfaction or surplus. Secondly, when the prices are lower than the equilibrium price, more consumers can afford to buy the product, increasing the overall consumer surplus in the market.
Moreover, when consumers demand more goods than are available on the market, the scarcity drives prices up. This leads to an increase in producer surplus as new suppliers enter the market to take advantage of the higher profit opportunities. The supply eventually adjusts to meet the demand, bringing the market back to equilibrium.
However, when barriers to trade are imposed and imports are excluded, the price can rise to a level called PNoTrade. The domestic quantity supplied increases, and hence the producer surplus increases. Meanwhile, because consumers are paying a higher price for a lower quantity than before, their consumer surplus decreases.