THE EFFECTS OF AN INCREASE IN SUPPLY ON CONSUMER SURPLUS. When there is an increase in SUPPLY there will be an increase in both consumer and producer surplus'. As the supply curve shifts to the right, some of the producer surplus is transferred to the consumer, but both are better off. With supply shifting to S2 the quantity supplied shifts to QE2 and the price changes to Pe2 causing an increase in surplus for both consumers and producers. Producer surplus before the increase was the area in blue, after the increase in supply to S2, the new surplus is the area in pink. Producer surplus has increased due to the fall in the Marginal Cost of production and so although the price has decreased, the producer surplus has increased. Consumer surplus before the increase in supply was the area in green and after the increase is now the area in green, blue and gray. Consumer surplus has increased due to the fall in price of the product.

THE EFFECTS OF AN INCREASE IN DEMAND ON CONSUMER SURPLUS. When there is an increase in DEMAND there will be an increase in both consumer and producer surplus'. As the demand curve shifts to the right, some of the consumer surplus is transferred to the producer, but both are better off. With demand shifting to D2 the quantity demanded shifts to Qe2 and the price changes to Pe2 causing an increase in surplus for both consumers and producers. Producer surplus before the increase was the area in light blue, after the increase in demand to D2, the new surplus are the areas in white, blue and light blue. Producer surplus has increased due to the increase in price.. Consumer surplus before the increase in supply was the area in white and after the increase is now the area in gray. Consumer surplus has increased due to the increase in demand and the consumer is now gaining more utils of satisfaction from the consumption of the product and so even though the price has increased, consumer surplus has also increased.