University:
Whitman College
Course:
ECON-101 | Principles of Microeconomics
Academic year:

2020
Views:

403

Pages:

1
Author:

Kristopher Elliott

Consumer and Producer Surplus Consumer Surplus = CS = the difference between what consumers are willing to pay and what they actually pay for a good or service. Producer Surplus = PS = the difference between what producers are willing to accept for their produce and what they actually receive for a good or service. Social Surplus = SS = CS + PS CS = area above equilibrium price and below demand P S PS = area below equilibrium price and above supply CS SS = CS + PS PS D Q To calculate CS or PS, use the formula for area of a triangle: (½)(base)(height) Example 1: P CS = (1/2)(40 – 0)(120 – 70) = (1/2)(40)(50) = (1/2)(2000) = 1000 120 S 70 PS = (1/2)(40 – 0)(70 – 50) = (1/2)(40)(20) = (1/2)(800) = 400 50 D 40 SS = 1000 + 400 = 1400 Q

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