How to Calculate Producer Surplus
How to Calculate Producer Surplus
What is Producer Surplus?
Producer Surplus is an economic measure of producer benefit
Producer Surplus describes the difference between the amount of money at which sellers are willing and able to sell a good or service and the amount they actually end up receiving (i.e. the market price). Every seller has an individual willingness to sell. If the market price is below that amount, they will not sell their good or service. On the other hand, as long as the market price is above or equal to their individual willingness to sell, they will accept the price, sell their products and thereby earn a producer surplus.
How do you Calculate Producer Surplus?
You can calculate Producer Surplus in 4 steps:
Step 1: draw the supply and demand curves
Step 2: find the market price
Step 3: connect the price axis and the market equilibrium
Step 4: calculate the area of the lower triangle.
How Can I also Calculate Producer Surplus?
You can also calculate producer surplus using our great Producer Surplus Calculator