Consumer surplus

& Producer surplus

DR M MANJUNATH SHETTIGAR
Consumer surplus

Consumer surplus is a measure of

consumer welfare.

It is measured as the difference

between the price consumers are willing
and able to pay for a good (based on
their expected satisfaction) and what
they actually pay (i.e. the price in the
market).
The concept of consumer surplus can be explained
with help of a numerical example and diagram as below:
The concept of consumer surplus can be explained
with help of a numerical example and diagram as below:
Change in consumer
surplus
If there is a shift in the demand curve or
supply curve leading to a change in the
equilibrium market price and quantity, then
the level of consumer surplus will also
change.
Producer surplus

Producer surplus is a measure of producer

welfare.

It is measured as the difference between

the price at which producers are willing
and able to supply a good and the price
they actually receive.
The concept of producer surplus can be explained
with help of a numerical example and diagram as below:
The concept of producer surplus can be explained
with help of a numerical example and diagram as below:
Change in Producer surplus

If there is a shift in the demand curve or

Supply curve leading to a change in the
equilibrium market price and quantity,
then the level of producer surplus will also
change.
Total economic welfare =
consumer surplus + producer
surplus
Total community welfare
= Consumer surplus + Producer surplus

PSQ

Cost of
production