2.3.4—Consumer and producer surplus

Consumer surplus is willingness to pay minus price; producer surplus is price minus willingness to accept. They measure gains from voluntary exchange.

Surplus changes when price, quantity or curve position changes, and distribution matters even when total surplus rises.

Mark the relevant area between price and demand or supply, then state who gains or loses.

If a buyer would pay $10 but pays$7, consumer surplus is $3 for that unit.

Surplus is not cash profit or a complete measure of wellbeing.