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What are consumer surplus and producer surplus? Where are they on the market curve?

What are consumer surplus and producer surplus? Where are they on the market curve?

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Answer #1
  • Consumer surplus refers to the difference between the amount the consumer is willing to pay and the price they actually for those goods and services.
  • Consumer surplus is said to be positive if the amount they are willing to pay is greater than the amount paid by them.
  • It is negative when the amount they pay is greater than the amount they could pay.
  • While the producer surplus is the difference between the amount of goods and services the producer is willing to supply and the price it recieves.
  • Consumer surplus is the area below the demand curve and above the supply curve in the demand-supply curve.
  • Producer surplus is the area above the demand curve and below the supply curve in the demand-supply curve.

The below diagram illustrates the area of both the consumer and producer surplus:-

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