Write short notes on consumer surplus and producer surplus.

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Write short notes on consumer surplus and producer surplus.

Consumer surplus 
The concept of consumer surplus was introduced by British Economist, Alfred Marshall in his book “Principles of Economics”. 

According to him, it is the experience with every consumer that he seldom pay the price equal to the utility which he drives from the purchase of a commodity. The price is usually less than the utility received by him. When the utility derived from the purchase of the commodity is higher than the utility of money spending on it, there occurs a gap between total utility and the total market value. 

This gap or the surplus utility, which is acquired by the consumer, is called consumer’s surplus. 

In other words, it is the difference between the prices a consumer is prepared to pay for a commodity and the price he actually pays. 

It is thus a measure of surplus utility or surplus welfare, which the consumer receives over and above what he pays. e.g. if a person is very thirsty, he is prepared mentally to pay even 15/- rupees for Cock or Pepsi. But he gets the Pepsi for Rs.10 then Rs.5/- is the consumer surplus.

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Producer Surplus
Using supply curve to measure producer surplus: Economist also suggests that producers receive a bone or added utility. Certain supplier would be willing to supply units at price less than the prevailing market price. So these suppliers earn more than they otherwise would back. This added value is referred to as producer’s surplus. In other words, producer surplus is the excess of revenue over total avoidable costs of supply.
 
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Naeem Javid Muhammad Hassani

NJMH is working as Deputy Conservator of Forests in Balochistan Forest & Wildlife Department (BFWD). He is the CEO of Tech Urdu (techurdu.net) Forestrypedia (forestrypedia.com), Majestic Pakistan (majesticpakistan.pk), All Pak Notifications (allpaknotifications.com), Essayspedia, etc & their YouTube Channels). He is an Environmentalist, Blogger, YouTuber, Developer & Vlogger.

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