Consumer and Producer Surplus

• Welfare analysis

  Understanding whether resources are being allocated efficiently or not
• Consumer surplus

  The difference between the price consumers are willing and able to pay for a good or service and the price that they actually pay
• Finding consumer surplus on a diagram

  It is normally a triangle shape found below the demand curve and above the price line
• Producer surplus

  The difference between the price producers are willing and able to supply a good or service for and the price that they actually receive
• Finding producer surplus on a diagram

  It is usually a triangle shape found above the supply curve and below the price line
• Society's surplus

  The sum of consumer and producer surplus