ECO111

MICROECONOMICS –
ECO111
GROUP
2
Đinh Huyền My
Lê Hải Nam
Hoàng Linh Chi
Đỗ Quang Anh
ECO111
01
CONSUMER
SURPLUS

02
PRODUCER
SURPLUS

03
ALLOCATION OF
RESOURCES
& MARKET
EFFICENCY
 CONTENTS OF THIS
TEMPLATE

• 1. What is consumer surplus?  How is it related to the demand curve?

• 2. What is producer surplus?  How is it related to the supply curve?

• 3. Do markets produce a desirable allocation of resources?  Or could the

market outcome be improved upon?
 CONSUMER
SURPLUS
• a consumer's willingness to pay for a good
minus the amount he or she actually pays
for that good.
• Price willing to pay
The area under the demand curve and above the
price level measures consumer surplus in a market.
 CONSUMER
SURPLUS
CS = (value to buyers) – (amount paid by buyers)

= buyers’ gains from participating in the market

Examples
You bought a plane ticket for a
flight for $100, but you were
expecting and willing to pay $300
for a ticket. Consumer surplus ??

=> CS = $300 - $100

= $200
01.
CHANGES IN
CONSUMER
SURPLUS
 CHANGES IN
CONSUMER SURPLUS

buyers leave the market

the remaining buyers have to

pay a higher selling price
PRODUC
ER
SURPLUS
PRODUCER SURPLUS
PRODUCER
SURPLUS
PS = (amount received by sellers) – (cost to sellers)

= sellers’ gains from participating in the market

Examples
if a producer is willing to sell a
good for $4, but can sell it for $10,
he will have a producer surplus of
$6

PS = $10 - $4
= $6
 Changes in
producer surplus

  the seller leaves the market

 the remaining sellers receive a lower

selling price
 ALLOCATION OF
RESOURCES

a b c

- different uses determined by the use total surplus as a

- distributed in many ways interaction of many self- social measure and we
such as through markets or interested buyers and look at whether the
schemes. sellers. market allocation is
efficient.
 2 3
Goods Increase or decrease
produced by the quantity of goods
a producer will not increase the
with lowest total surplus
cost.
 Market efficiency

Consumer surplus Value received by consumers Charges paid by consumers

Producer surplus Amount received by producers Cost of production they incur

 Market efficiency

Consumer surplus

Total surplus

Producer surplus