Producer surplus
Definition. Producer surplus is the difference between the price a producer actually receives for a good and the minimum price they would have been willing to accept to supply it. On a diagram it is the area above the supply curve and below the market price, up to the quantity traded.
Producer surplus represents the benefit to producers from participating in the market. Together with consumer surplus it makes up total economic welfare, which is maximised at the allocatively efficient output.
This term belongs to Consumer and Producer Surplus in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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