Producer And Consumer Surplus

Producer surplus is the difference between what the producers are willing and able to supply and the price they actually receive.

• The producer surplus is shown as the area above the supply curve and below the market price. 
• The level of producer surplus can vary dependent on the shift in supply or demand. 

Consumer surplus is the difference between what you are willing and able to pay and what you actually pay.

• It is the area beneath the demand curve and above the market price. 
• It is a measure of welfare gain for people consuming the good/service
• Consumer surplus varies on the elasticity of demand. When the price is perfectly elastic the price they are willing to pay is the price they actually pay, therefore consumer surplus is 0 and vice versa when demand is perfectly inelastic.
• Consumer surplus also can vary dependent on shifts in supply and demand. Example a higher supply leads to a higher price and therefore a fall in consumer price.

When put together the surpluses look like this.