Saturday, July 28, 2018

Surplus; only for which producer work

Imagine that you have a wedding in your house. So you have to hire a sweet maker. And you approach many sweet makers according to your budget,out of them three is ready to do work for you on your budget. Because they would receive the exceed amount than they would put to make sweets i.e raw material. Now you have to choose right person for your work.The cost that will occur to sweet maker is opportunity cost.producer surplus is the difference between the amount seller paid and cost that occurred to seller (as for sweet maker).ln other words at a market price,producer who are ready to supply goods at lower price that difference is called producer surplus.
                                 Producers always want higher prices for their products that they sell in a market.we use producer surplus to measure the well being of sellers in much the same way as we use consumer surplus to well being of buyers. Because these two measures of economic welfare are so similar, it is natural to use them together.
               Producer surplus is closely related to  the supply curve. The height of supply curve measure seller's costs and the difference between price and cost of production is  each seller's producer surplus.

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