|
© Tutor2u Limited All Rights Reserved. These study notes are protected by copyright and may not be reproduced in part or in whole, for whatever reason, without the prior written permission of tutor2u. The use of tutor2u content for commercial gain of any kind is strictly forbidden. We reserve the right to take legal action against any party or parties found to have breached our copyright. AS Markets & Market SystemsProducer Surplus |
Producer surplus relates to the welfare that businesses can achieve by supplying products to the market. Defining producer surplus Producer surplus is a measure of producer welfare. It is measured as the difference between what producers are willing and able to supply a good for and the price they actually receive. The level of producer surplus is shown by the area above the supply curve and below the market price and is illustrated in this diagram.
Producer surplus and changes in demand and supply We first consider the effects of a change in market supply – for example caused by an improvement in production technology or a fall in the cost of raw materials and components used in the production of a good or service.
We now consider the effects on producer surplus of a rise in market demand:
|
| Author: Geoff Riley, Eton College, September 2006 |
Teacher Subject Newsletters | Teacher Forums | Online Store | tutor2u News tutor2u on Twitter: Subject Blogs: About tutor2u | Copyright | Privacy | Terms of Use | Contact tutor2u Our Development Partners: |
