1.2.8: Consumer and Producer Surplus

• Consumer surplus: The difference between the price consumers are willing to pay and the price they actually pay
• Consumer surplus is a measure of consumer welfare
• Producer surplus: The difference between the price producers are willing to supply at and the price they actually supply at
• Producer surplus is used to measure producer welfare
• Consumer surplus is shown by the area above the price level, but below the demand curve
• Producer surplus is shown by the area below the price level, but above the supply curve