Calculating Surplus (HL Only)
Competitive Market Equilibrium
AO4·HL
Syllabus requirement
HL students should be able to calculate consumer and producer surplus using marginal benefit and cost data or graphs.
Assessment objectives
AO4 Use of Appropriate Skills
Higher LevelThis topic is assessed at HL.
Summary
This topic explains how consumer surplus and producer surplus are measured and calculated in a competitive market, and how their sum (community or social surplus) is maximised at the competitive equilibrium where marginal benefit equals marginal cost. It describes graphical methods (areas under demand and above supply) and discrete methods (unit-by-unit differences) for computing surplus, and links maximised total surplus to allocative efficiency.
