Consumer and Producer Surplus
Competitive Market Equilibrium
AO2·AO4·Diagram required
Syllabus requirement
Consumer surplus is the benefit consumers receive when they pay less than they are willing to pay. Producer surplus is the benefit producers receive when selling at a price higher than their minimum acceptable price.
Assessment objectives
AO2 Application and AnalysisAO4 Use of Appropriate Skills
Required diagram: Diagram showing demand and supply curves with shaded areas for consumer surplus (above price, below demand) and producer surplus (below price, above supply).
Summary
This topic explains consumer surplus and producer surplus in a competitive market and how they are shown on a demand-and-supply diagram. Consumer surplus is the extra benefit buyers get when they pay less than their willingness to pay, while producer surplus is the extra benefit sellers get when they receive more than their willingness to supply; both are measured by shaded areas around the equilibrium price and quantity.
