1.2.8 Consumer and producer surplus

1.2.8 Consumer and producer surplus

What is consumer surplus

• the difference between the consumers willingness to pay and the actual price paid for the product

What is producer surplus

• the difference between the selling price and the price the producer is willing to sell the product for

Identify consumer and producer surplus on a supply--demand graph

What are the changes to producer and consumer surplus when demand / supply increases / decreases

increase in demand or supply

• both increase

decrease in demand or supply

• both decrease