OCTOBER 17, 2022

MICROECONOMICS
ASSIGNMENT:01
Producer Surplus
Producer surplus is the total amount that a producer benefits from producing and selling a quantity of a good at the
market price
Formula:
Total revenue - marginal cost = producer surplus
Example:
Producers can use their producer surplus to identify how
much they might earn by selling a higher quantity of
products. For example, if the market value of an item is $50
but customers pay $100, the company may have the
additional funds to produce more of that item and earn a
profit.

Total Producer surplus:

The total surplus in a market is a measure of the total wellbeing of all participants in a
market. It is the sum of consumer surplus and producer surplus. Consumer surplus is the
difference between willingness to pay for a good and the price that consumers pay for it

Formula:
Total surplus = Consumer surplus + Producer surplus
Example :
Likewise, sellers can sell a product at a higher price than their economic cost to produce a product: the difference between
the economic cost and the market price is the producer surplus. To measure total economic welfare, we can add the
consumer surplus to the producer surplus to arrive at the total surplus