CONSUMER SURPLUS AND PRODUCER SURPLUS

   CONSUMER SURPLUS

         

       It is the difference between the price that a buyer is willing to pay and the buyer is actually pays.
                              
 Example                     
                   There are three persons who wants to buy painting in an auction. Each of them are looking to buy that painting. Each one have to limit according to their budget. Below table shows that maximum price that each of them pays. That maximum amount of each buyer is called willingness to pay. Each buyer is eager to pay the painting at a price  less than their actual pay.
                                                 
                                                   BUYER          WILLING TO PAY
                                                    person A        500$
                                                    person B         300$
                                                    person C         200$
As the person A  stops the bid at 350$ and another two persons are unwilling to do bid further. person A got the painting .Here the point is that he is willing to pay 500$ but he actually pays the amount is 350$. Person A receives consumer surplus of amount 150$.

   PRODUCER SURPLUS
 

                               It is the  difference between the price that a producer is willing to sell and the price actually sold. the surplus amount is the benefit that producer receives for selling the good.

  Example

                           

               A producer is willing to sell 100 apples each of price 2$ and consumer is willing to purchase it at 3$. If the producer sells the apples at a price of 3$, receives an amount of 300$. 300$-200$=100$. Here the producer got a surplus amount of 100$.