How to use it
- Choose market (linear demand and supply) or single deal.
- Market: enter the price where demand falls to zero, the price where supply starts, the market price and the quantity sold.
- Single deal: enter the buyer’s willingness to pay, the seller’s cost, the price and the number of units.
Formula
Market with straight-line curves (triangles on a price-quantity chart):
- Consumer surplus = ½ × (demand’s highest price − price) × quantity
- Producer surplus = ½ × (price − supply’s lowest price) × quantity
Single deal:
- Consumer surplus = (willingness to pay − price) × units
- Producer surplus = (price − seller’s cost) × units
Worked example
Demand reaches zero at 50, supply starts at 10, and the market clears at a price of 30 with 200 units sold:
- Consumer surplus = ½ × (50 − 30) × 200 = 2,000.00.
- Producer surplus = ½ × (30 − 10) × 200 = 2,000.00.
- Total surplus 4,000.00; buyers spend 30 × 200 = 6,000.00.
A single deal: someone who would pay 120 buys 3 units at 80 from a seller whose cost is 50. Consumer surplus (120 − 80) × 3 = 120.00, producer surplus (80 − 50) × 3 = 90.00.
Tips
- In market mode enter the equilibrium price and quantity, where demand and supply meet. With a price floor or ceiling the areas are no longer simple triangles.
- With curved demand the triangle is only an approximation.
- Surplus is measured in money, but it is a gain in welfare, not cash anyone receives.