What is producer surplus?
Producer surplus = shaded area above supply and below price
Why the supply curve represents minimum acceptable price
Calculating producer surplus
Worked example
Individual producer surplus
How price changes affect PS
Price increases → PS increases
Price decreases → PS decreases
Price increase from $4 to $6 increases producer surplus
CS and PS together
At equilibrium: CS is above price and below demand; PS is below price and above supply
AP exam tips for 2.8
- •
- •
- •
- •
Common mistakes
- •
- •
- •
- •
Key equations
Vocabulary
Unit 2 topics
Unit 2 overview2.1Changes in Demand2.10Tax Incidence and Deadweight Loss2.11Price Controls: Ceilings and Floors2.12International Trade and Public Policy2.2Changes in Supply2.3Price Elasticity of Demand2.4Price Elasticity of Supply2.5Cross-Price Elasticity of Demand2.6Income Elasticity of Demand2.7Consumer Surplus2.8Producer Surplus2.9Market Equilibrium and Efficiency