IB Economics Topic 2.3.4 Consumer and Producer…

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IB Economics Topic 2.3.4 Consumer and Producer… | RevisionDojo

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Consumer and Producer Surplus: The Gap Between Value and Price

Definition

Consumer surplus

The difference between the highest price consumers are willing and able to pay for a good or service and the actual price they end up paying.

Definition

Producer surplus

The difference between the price sellers receive and the lowest price that they are willing and able to accept.

Both surpluses measure a gain from the gap between what a good is worth to someone and the price actually paid or received.
On the diagram, the demand curve shows the highest price buyers will pay for each unit, and the supply curve shows the lowest price sellers will accept.
The equilibrium price is the single price everyone actually trades at.
Consumer surplus is the area below the demand curve and above the price, up to the equilibrium quantity.
Producer surplus is the area above the supply curve and below the price, up to the equilibrium quantity.
A Spotify subscriber who would gladly have paid more than the fee keeps the difference as consumer surplus, while sellers who would have supplied for less keep the rest as producer surplus.
Added together they make total surplus, which is largest at the competitive equilibrium (covered in 2.3.5 and 2.3.6).

Consumer Surplus: The Value Buyers Keep Above the Price

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Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

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Note

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Tip

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Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

IB Economics 2.3.4 Consumer and Producer Surplus Notes

Consumer and Producer Surplus: The Gap Between Value and Price

Consumer Surplus: The Value Buyers Keep Above the Price

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

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Consumer and Producer Surplus: The Gap Between Value and Price

Consumer Surplus: The Value Buyers Keep Above the Price

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

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1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

IB Economics 2.3.4 Consumer and Producer Surplus Notes

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

Consumer and Producer Surplus: The Gap Between Value and Price

Consumer Surplus: The Value Buyers Keep Above the Price

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

Consumer and Producer Surplus: The Gap Between Value and Price

Consumer Surplus: The Value Buyers Keep Above the Price

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account