AP Economics
Mr. Bernstein
Module 49:
Consumer and Producer Surplus
October 23, 2014
AP Economics
Mr. Bernstein
Consumer Surplus
• The difference between what a consumer is willing to pay for a good or
service and what they actually have to pay
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AP Economics
Mr. Bernstein
Willingness to Pay
• Willingness to Pay is found along the demand curve
• Purchases that can be made at lower prices create a net gain
in happiness for the consumer; measured in dollars we call it
Consumer Surplus
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AP Economics
Mr. Bernstein
Calculating Consumer Surplus
• The area below the
demand curve or WTP line
and above the price
• Area = ½ base * height
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AP Economics
Mr. Bernstein
Producer Surplus
• The difference between what a producer must receive to sell a unit and the
actual price they receive
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AP Economics
Mr. Bernstein
Cost and Producer Surplus
• Producer Cost is found along the supply curve
• Producer Surplus is the difference between price and the
cost of producing a unit
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AP Economics
Mr. Bernstein
Calculating Producer Surplus
• The area above the
supply curve
and below the price
• Area = ½ base * height
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AP Economics
Mr. Bernstein
Changes in Price Affect Consumer and Producer
Surplus
• If price decreases:
• Consumer surplus increases(willingness to pay is the same, but the
price paid is lower)
• Producer surplus decreases (costs are the same but price received is
lower)
• If price increases:
• Consumer surplus decreases (willingness to pay is the same but the
price paid is higher)
• Producer surplus increases (costs are the same but the price received
is higher)
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AP Economics
Mr. Bernstein
Total Surplus = Consumer Surplus + Producer
Surplus
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