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figure 49.7
Producer Surplus in the Used- Price of
book
Textbook Market S
At a price of $30, Andrew, Betty, and Carlos each
sell a book but Donna and Engelbert do not. An- $45 Engelbert
drew, Betty, and Carlos get individual producer sur-
pluses equal to the difference between the price
and their cost, illustrated here by the shaded rec- 35 Donna Section 9 Behind the Demand Curve: Consumer Choice
tangles. Donna and Engelbert each have a cost that
is greater than the price of $30, so they are unwill- 30 Price
ing to sell a book and so receive zero producer sur- 25 Carlos Carlos’s
plus. The total producer surplus is given by the producer
entire shaded area, the sum of the individual pro- surplus
ducer surpluses of Andrew, Betty, and Carlos, equal Betty’s
to $25 + $15 + $5 = $45. 15 Betty
producer
Andrew’s surplus
producer
5 Andrew surplus
0 1 2 3 4 5 Quantity of books
Again, as with consumer surplus, we have a general rule for determining the
total producer surplus from sales of a good: The total producer surplus from sales of a
good at a given price is the area above the supply curve but below that price.
This rule applies both to examples like the one shown in Figure 49.7,
where there are a small number of producers and a step-shaped supply
curve, and to more realistic examples, where there are many producers and
the supply curve is more or less smooth.
Consider, for example, the supply of wheat. Figure 49.8 shows how pro- istockphoto
ducer surplus depends on the price per bushel. Suppose that, as shown in
figure 49.8
Producer Surplus Price of
wheat
Here is the supply curve for wheat. At a price of $5
(per bushel)
per bushel, farmers supply 1 million bushels. The S
producer surplus at this price is equal to the shaded
area: the area above the supply curve but below the
price. This is the total gain to producers—farmers in
this case—from supplying their product when the
price is $5.
$5 Price
Producer
surplus
0 1 million
Quantity of wheat (bushels)
module 49 Consumer and Producer Surplus 491
