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What is Producers Surplus
It is the price that the producers receive over what the good is sold at. It can also be called as the difference between the minimum price of the supply that the sellers are ready to take for their goods and the actual price that is received by them after the good is sold out.
A relative thing from the consumer side would be called as the consumer surplus. Tutorspoint provides Producers Surplus Homework Help for college and university students.
It can also be termed as the extra revenue that the producers receive on selling the goods that they are producing.
In this case, the supply price that thy actually received is found to be very less. In most of the cases, the producers receive some kind of surplus in each and every good of theirs.
It happens even in the case of the competitive markets which are highly efficient in nature. This in other terms or put in simple terms would be the profit that the producers make out of the goods that they are producing.
Producers Surplus Example
Let us consider a simple example to explain better.
In the case of an ice cream shop that is very famous, it is willing to accept a price of one dollar for an ice cream that they sell.
It would be the supply price that they are giving it at. This is something that is very essential to cover the production costs incurred by the firm in producing the ice creams. But they come to know that in the current market scenario, the same type of ice creams are sold at a price of two dollars, which the consumers are readily able to pay.
Though it was ready to sell it at one dollar, it sold it at two. It has made a producer surplus of one dollar for each ice cream here.
What is Consumers Surplus
While talking about the producers’ surplus, it would be essential to know about it too.
A) If there is a surplus that is created in the case of the demand side of the market, it would be called the consumer surplus.
B) It is also existent in the efficient and competitive markets too, as in the case of the producer’s surplus.
C) It is true that in the case of the efficient markets only there are more of these consumers surplus seen.
D) It holds good for the producer’s surplus too. If the maximum is not reached, then the market is not considered an efficient one.