Figure 12-5 Consumer and Producer Surplus in a Competitive
Market
market price is and consumers buy units of the product, consumer
surplus is the blue-shaded area.
Consumer surplus is the area under the demand curve and above the
market price line. Producer surplus is the area above the supply curve
and below the market price line. The total value that consumers place on
of the commodity is given by the area under the demand curve up to
The amount they pay is the rectangle The difference is the
shaded area labelled consumer surplus.
The revenue to producers from the sale of units is The area
under the supply curve is the minimum amount producers require to
supply the output. The difference is the shaded area labelled producer
surplus.
Producer surplus is an analogous concept to consumer surplus. Producer
surplus is the difference between the actual price that the producer
receives for a product and the lowest price that the producer would be
willing to accept for the sale of that product. By producing one more unit,
the producer’s costs increase by the marginal cost, and this is the lowest
p 0 Q 0Q 0
Q 0. p 0 Q 0.
Q 0 p 0 Q 0.