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251Ch5lecture2 - Consumer Surplus Chapter 5 Efficiency and...

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9/14/2011 1 1 Chapter 5: Efficiency and Equity Lecture 2: Consumer and producer surplus Consumer Surplus Consumer Surplus = Value consumers receive over and above the price paid = MB price summed across all quantities Consumer surplus on a graph Consumer surplus on a graph P Q 4 6 2 4 12 CS=½bh =1/2*(4)(8) =$16 Consumer & Producer Surplus Producer Surplus = Value suppliers receive over and above MC of production = P-MC summed across all quantities Producer surplus on a graph
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