Calculating+Consumer+and+Producer+Surplus

You have already seen in SL classes what consumer and producer surplus is. HL students also need to be able to calculate both of these mathematically.



A bit of basic maths: The area of a triangle is 1/2 base x height.

So in the example above it looks like S cuts the P axis at zero (remember this isn't always so, so you may have to measure this in other examples). If D cuts the P axis at say 16, then half the base is 16-0/2=8. Now let's say the equilibrium Q is 2000. Then the total community surplus is8 x 2,000= 16,000$ You may also be asked to calculate both the producer and consumer surplus separately.

Student Task: Using an appropriate diagram or equations, calculate the value of the consumer and producer surplus at the market equilibrium for a market defined by the following equations:  Qd=80-5P Qs=-24+8P 