Consumer and producer surplus
| English | Chinese | Pinyin |
|---|---|---|
| consumer surplus | 消费者剩余 | xiāo fèi zhě shèng yú |
| welfare | 福利 | fú lì |
| producer surplus | 生产者剩余 | shēng chǎn zhě shèng yú |
| total welfare | 总福利 | zǒng fú lì |
| price control | 价格管制 | jià gé guǎn zhì |
| deadweight loss | 无谓损失 | wú wèi sǔn shī |
The bonus you get on every purchase
- You'd have paid £5 for that coffee — but it costs £3. That extra £2 of value is yours to keep. Economists call it consumer surplus 消费者剩余.
- Surplus measures the welfare 福利 a market creates — for buyers and sellers alike.
Consumer surplus
- Consumer surplus = the gap between what buyers are willing to pay (the demand curve) and what they actually pay (the price).
- On the diagram it's the triangle below demand and above the price.
Consumer surplus sits below the demand curve and above the price; producer surplus 生产者剩余 sits above supply and below the price.
Demand & supply
Surplus sits between the curves and the going price.
Consumer surplus is the difference between:
It is the value buyers get above the price — the area below demand and above price.
Producer surplus
- Producer surplus = the gap between the price firms receive and the minimum they'd accept (the supply curve).
- It's the triangle above supply and below the price.
Consumer surplus and producer surplus at the market equilibrium
Producer surplus is shown on the diagram as the area:
Producer surplus = price received minus minimum acceptable (the supply curve).
Match each surplus to its area on the diagram.
Consumers gain above the price up to the demand curve; producers gain below the price down to supply.
Total welfare 总福利
- Total welfare (economic surplus) = consumer surplus + producer surplus.
- At the free-market equilibrium this total is maximised — one reason economists prize competitive markets.
A price control 价格管制 shrinks total surplus. A price ceiling or floor moves the market away from equilibrium, creating a deadweight loss 无谓损失 — surplus that simply disappears.
Total welfare (consumer surplus + producer surplus) is maximised at the free-market equilibrium.
At equilibrium the sum of the two surpluses is largest; moving away creates deadweight loss.
A price control creates a loss of surplus called a ______ loss.
Moving away from equilibrium destroys some total surplus — deadweight loss.
You've got it
- consumer surplus = below demand, above price (buyers' bonus)
- producer surplus = above supply, below price (sellers' bonus)
- total welfare = CS + PS, maximised at the free-market equilibrium