CONSUMER SURPLUS:-
Consumer surplus is an economic measure of consumer benefit. by analyzing the difference between what consumers are willing and able to pay for a good or service. consumer surplus is derived whenever the price a consumer actually pays is less than they are prepared to pay.
EXAMPLE:-
You step up in a store and find a really cool shirt. Based on the brand you know this type of shirt is really expensive. You also admit that the usual high price would be okay, considering the quality of the fabric. So imagine you surprise when you see that the shirt has a discount tag on it, on sale with 40% discount! that mean you are going to end up buying the shirt below the actual value. This is consumer surplus.
PRODUCER SURPLUS:-
Producer surplus is additional benefit to producers, in term of profit, gained when the price they receive in the market more than the minimum they would be prepared to supply for. It is the difference between how much of good the producer is willing to supply versus how much he receive in trade.
EXAMPLE:-Coffee is good example of product that is essentially the same across all the producers but depending upon where it is sold. Starbucks can charge more than McDonald`s for a cup of coffee because coffee drinkers have strong preference regarding where they buy their coffee drinks and what they believe is a reasonable price for a cup of coffee . The difference between the lowest available price for a cup of coffee and the highest price is the producer surplus.
Consumer surplus is an economic measure of consumer benefit. by analyzing the difference between what consumers are willing and able to pay for a good or service. consumer surplus is derived whenever the price a consumer actually pays is less than they are prepared to pay.
EXAMPLE:-
You step up in a store and find a really cool shirt. Based on the brand you know this type of shirt is really expensive. You also admit that the usual high price would be okay, considering the quality of the fabric. So imagine you surprise when you see that the shirt has a discount tag on it, on sale with 40% discount! that mean you are going to end up buying the shirt below the actual value. This is consumer surplus.
PRODUCER SURPLUS:-
Producer surplus is additional benefit to producers, in term of profit, gained when the price they receive in the market more than the minimum they would be prepared to supply for. It is the difference between how much of good the producer is willing to supply versus how much he receive in trade.
EXAMPLE:-Coffee is good example of product that is essentially the same across all the producers but depending upon where it is sold. Starbucks can charge more than McDonald`s for a cup of coffee because coffee drinkers have strong preference regarding where they buy their coffee drinks and what they believe is a reasonable price for a cup of coffee . The difference between the lowest available price for a cup of coffee and the highest price is the producer surplus.
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