Consumer/producer surplus

• Consumer surplus

  1. difference between the amount that the consumer is willing and able to pay for a product and that product's actual price
• The effect of consumer surplus of tax is a decrease in the producer surplus
• The effect on consumer surplus of tax is also a decrease in consumer surplus
• The effect on producer revenue of tax is a decrease in total revenue after tax
• Producer surplus

  the difference between the amount that the producer is willing and able to supply a product for and the actual market price
• A shift in supply or demand


  affects consumer surplus and therefore consumer utility
• A shift in supply/ demand

  affects the producer surplus and producer revenue and therefore their profits
• Increase in consumer surplus

  increases consumer utility
• increase in producer surplus


  increases profits in the industry