1.2.8 Consumer and producer surplus

• What is consumer surplus?

  Consumer surplus is the difference between the price the consumer is willing to pay and the price they actually pay.
• How is consumer surplus determined?

  It is determined by the price mechanism.
• What is producer surplus?


  Producer surplus is the difference between the price the supplier is willing to produce their product at and the price they actually produce at.
• How is producer surplus determined?

  It is determined by the price mechanism.
• What are the key differences between consumer surplus and producer surplus?

  • Consumer surplus: Difference between willingness to pay and actual price paid.
  • Producer surplus: Difference between willingness to produce price and actual price received.
  • Both are determined by the price mechanism.