How do I find producer surplus on a supply and demand diagram?

In order to locate producer surplus on a supply and demand diagram, look for the area: These rules are illustrated for a very basic supply curve/price scenario in the diagram above. (Producer surplus is of course labeled as PS.) In most cases, we won't be looking at consumer surplus and producer surplus in relation to an arbitrary price.

How do you calculate consumer and producer surplus?

Pe is the equilibrium price and Qe is the equilibrium quantity of the supply and demand of the good (i.e. when supply is equal to demand). From Figure 1 the following formula can be derived for consumer and producer surplus: CONSUMER SURPLUS = (Qe x (P2 – Pe)) ÷ 2. PRODUCER SURPLUS = (Qe x (Pe – P1)) ÷ 2. WHERE: Qe is the equilibrium price.

What is a producer surplus?

This is the difference between the price a firm receives and the price it would be willing to sell it at. If a firm would sell a good at £4, but the market price is £7, the producer surplus is £3. If demand is price inelastic, then there is a bigger gap between the price consumers are willing to pay and the price they actually pay.