MJ Industries

What is Consumer Surplus? Consumer surplus refers to the difference between what a consumer is willing to pay for a good and what they actually pay. In other words, it’s the savings or benefit a consumer gets when purchasing something for a lower price than they would have been willing to pay. Example: Imagine you’re looking to buy a product for $100, but you find it secondhand for $10. In this case, your consumer surplus is the difference between the $100 you were willing to pay and the $10 you actually spent—so $90. This $90 represents the consumer surplus. What is Producer Surplus? Producer surplus is the amount of profit a producer makes from selling a product. It’s the difference between the price they charge for the product and the cost to produce it. Example: Let’s say a company produces a good that costs $1 to make, and they sell it for $10. The producer surplus in this case would be the $10 selling price minus the $1 cost to produce it, resulting in a $9 producer surplus. Ex...