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Surplus: Consumer and Producer

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Surplus: Consumer and Producer

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    1. Consumer surplus. The consumer surplus is equal to the difference between marginal benefit and price. It is added up for all the units the consumer buys. Producer surplus. The producer surplus is equal to the difference between price and cost. It is added up for all the units the producer sells. Total surplus. Total surplus is the sum of consumer surplus and producer surplus (and any tax revenue collected by the government). Remind how to calculate surplus with “clean triangles”, i.e., ˝ base*height. Consumer surplus. The consumer surplus is equal to the difference between marginal benefit and price. It is added up for all the units the consumer buys. Producer surplus. The producer surplus is equal to the difference between price and cost. It is added up for all the units the producer sells. Total surplus. Total surplus is the sum of consumer surplus and producer surplus (and any tax revenue collected by the government). Remind how to calculate surplus with “clean triangles”, i.e., ˝ base*height.

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