Advanced Placement Microeconomics analyzing individual economic decision-making.
Surplus is a way to measure the benefit buyers and sellers get from participating in a market.
Consumer surplus is the difference between what buyers are willing to pay and what they actually pay.
Producer surplus is the difference between what sellers are willing to accept and what they actually receive.
On a supply and demand graph, consumer surplus is the area above the price and below the demand curve. Producer surplus is below the price and above the supply curve.
Surplus shows the gains from trade and helps economists judge how well a market is working.
A movie ticket costs $10, but you're willing to pay $15. Your consumer surplus is $5.
A farmer sells corn for $4 per bushel but would have accepted $3. The producer surplus is $1.
Consumer and producer surplus measure the benefits that buyers and sellers get from market transactions.