consumer surplus and producer surplus

2006-11-17 7:17 am
what is the meaning of both of them???
i knew consumer surplus is something abt how consumers willing to pay,is it?
how abt producer surplus???

explain PLZ.
either in chinese or english is fine

回答 (3)

2006-11-17 8:32 am
✔ 最佳答案
Please see the following diagram:
http://upload.wikimedia.org/wikipedia/commons/thumb/2/2b/Consumer_producer_surplus_from_finn.png/603px-Consumer_producer_surplus_from_finn.png

Here the red part is cosumer surplus and blue is for producer surplus, and the line which distingushes them is the equilibrium price.

You see, the demand curve is actually the reservation price of the consumers for each unit, which means the highest price they are willing to pay, and the supply curve is the reservation price of producers for each unit, which is the lowest price acceptable for the producer to supply that particular quantity.

When the reservation price consumer is above the equilibrium price, which means the price you have to pay is actually less than the amount you are willing to pay, and the welfare consumers enjoy as a result is called consumer surplus.

And producer surplus follows the same logic, only that the equilibrium price is higher than its reservation price, which means you actually earn more than the minimum price level acceptable to you to supply that quantity, and the welfare gained is the producer surplus.
2008-12-16 2:12 am
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2006-11-17 7:59 pm
The answer above is pretty in details.
I just want to add a simple point that, looking at a simple demand and supply diagram, the area of consumer surplus will be the area between the demand curve and the price line. And the area of producer surplus will be the area between the supply curve and the price line.

Cheers !


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