CONSUMER AND PRODUCER SURPLUSES

Consumer surplus -the difference between what consumers are willing to pay rather than go without a commodity and what they actually have to pay in the market.
The area in red in the diagram on the right shows the consumer surplus.

DEFINITION:
The difference between the satisfaction the consumer receives from consuming a good and the price they have to pay.

Producer surplus - the sum of all short - run profits in an industry; the difference between total revenue from supplying a good and the costs represented by the area under the supply curve. The area in Grey in the diagram on the right shows the producer surplus.

DEFINITION:
The difference between the price the producer receives for the good and the MC of producing it.
   
CONSUMER SURPLUS  

CONSUMER SPENDING

TOTAL CONSUMER UTILITY

CONSUMER SURPLUS
Total Consumer Spending on the product is equal to the area in purple - which in this case is $900 0000. But the total number of utils (shown by the area in brown above)- measured in dollars is
$1 125 000.		 So the consumer surplus is
$225 000, as shown by the area
in blue above.
PRODUCER SURPLUS  

PRODUCER REVENUE

PRODUCER COSTS OF PRODUCTION

PRODUCER SURPLUS

Total revenue from sell the product is shown by the area in purple. Which in the this case is $900 000.

 Total costs of production are shown by the area in gray above. In this case it is
$750 000.		 So the producer surplus is
equal to the area in yellow
above, which is $150 000.