PRODUCER

AND
CONSUMER
SURPLUS
I S H A A G G A RWA L
PG D M 3
 PRODUCER SURPLUS
 Producer surplus is defined as the difference between
the amount the producer is willing to supply goods for
and the actual amount
received by him when he makes the trade.

 Producer surplus is a measure of producer welfare. It is

shown graphically as the area above the supply curve and
below the equilibrium price.

 A producer always tries to increase his producer

surplus by trying to sell more and more at higher prices.

Here the producer surplus is shown in gray. As the price

increases, the incentive for producing more goods
increases, thereby increasing the producer surplus.
NEWS ARTICLE RELATED TO INCREASE IN PRODUCER
SURPLUS
 IMPACT ON PRODUCER SURPLUS AND COST
FUCNTION
Typical transport infrastructure
improvements reduce effective distances
between origins and destinations by
reducing congestion, thereby lowering
travel times.
 Travelers gain directly from travel time
savings and lowered vehicle-operating
costs. Companies enjoy direct efficiency
gains from cheaper and more reliable
freight services and reduced assembly and
delivery costs.
 Cheaper and better transportation services
provide incentives for firms to reorganize
and reduce their inventories, sometimes to
just-in-time levels.
 The advantages of scale economies occur
as firms consolidate production and
distribution sites and increase outputs.
CONSUMER
SURPLUS
 The consumer surplus refers to the
difference between what a consumer is
willing to pay and what they paid for a
product.
 Consumer surplus always increases as the
price of a good falls and decreases as the
price of a good rises.
 It is depicted visually by economists as the
triangular area under the demand curve
between the market price and what
consumers would be willing to pay.
 Consumer surplus plus producer surplus
equals the total economic surplus.
NEWS ARTICLE RELATED TO INCREASE IN CONSUMER SURPLUS
What is 'Wholesale Price Index'

Definition: Wholesale Price Index (WPI) represents the

price of goods at a wholesale stage i.e. goods that are sold
in bulk and traded between organizations instead of
consumers. WPI is used as a measure of inflation in some
economies.

Reduction in inflation rate will lead to reduce prices of

essential commodities needed by a consumer in a nutshell
in his/her basket .

That will further increase the consumer surplus of the

cosumer due to increased shaded region .
THANK YOU!!