Consumer Surplus
It is the difference between the total amount that consumer are willing to pay for a good or service and the total amount that they actually do pay (i.e. the market price)
Consumer Surplus is indicated by the area under the demand curve and above the market price
For Example – A consumer willing to pay Rs.10 for a salt packet but after going to market he pays Rs.8. So consumer surplus on a salt packet is (10-8) Rs.2.
Producer Surplus
It is the difference between what producers are willing and
able to supply a good for and the price they actually receive.
Producer surplus shown by area above the supply curve and below the market price.
For Example – A Seller willing to sell a salt packet for Rs.8 but after he sells it at Rs.10. So producer surplus on a salt packet is (10-8) Rs.2.
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