Consumer & Producer Surplus
Measure consumer, producer, and total surplus as the triangular areas of a linear supply-and-demand market.
Consumer surplus $250.00 + producer surplus $150.00 = total surplus $400.00.
Consumer and producer surplus are the two triangular areas between price and the demand and supply curves at equilibrium. With a demand choke price of $20, a supply intercept of $4, an equilibrium price of $10, and 50 units traded, CS = $250, PS = $150, and total surplus = $400.
What consumer and producer surplus measure
In a linear supply-and-demand market, consumer surplus is the value buyers get above what they actually pay: the gap between the highest price each buyer would accept and the market price, summed across everyone who buys. Producer surplus mirrors it for sellers — the gap between the market price and the lowest price each seller would accept. Because both curves are straight lines, each surplus is a right triangle sitting against the equilibrium price line, so the area formula ½ × base × height gives an exact answer.
Each surplus is a triangle: height is the price gap, base is the equilibrium quantity. Total surplus = CS + PS.
Worked example
Demand hits zero at a choke price of $20, supply starts at $4, the market clears at $10, and 50 units change hands.
- 1 Find the demand choke price and equilibrium price. The choke price is where quantity demanded reaches zero — here $20. The equilibrium price is $10, so the consumer-surplus triangle is $20 − $10 = $10 tall.
- 2 Compute consumer surplus. CS = ½ × (P_dmax − P_eq) × Q_eq = ½ × ($20 − $10) × 50 = $250.
- 3 Find the supply intercept price. The intercept is the lowest price sellers accept — here $4. The producer-surplus triangle is $10 − $4 = $6 tall.
- 4 Compute producer surplus. PS = ½ × (P_eq − P_smin) × Q_eq = ½ × ($10 − $4) × 50 = $150.
- 5 Add them for total surplus. Total surplus = CS + PS = $250 + $150 = $400 — the total gains from trade at equilibrium.
What each input means
The two prices set the triangle heights; the equilibrium quantity is the shared base.
| Term | What it is | Role in the formula |
|---|---|---|
| Demand choke price (P_dmax) | The demand curve’s price intercept — the price at which quantity demanded falls to zero. | Top of the consumer-surplus triangle. |
| Supply intercept price (P_smin) | The supply curve’s price intercept — the lowest price at which sellers supply anything. | Bottom of the producer-surplus triangle. |
| Equilibrium price (P_eq) | The market-clearing price where quantity supplied equals quantity demanded. | The dividing line between the two triangles. |
| Equilibrium quantity (Q_eq) | The number of units traded at the equilibrium price. | The shared base of both triangles. |
Reading the result
Straight-line assumption. These formulas assume both the supply and demand curves are straight lines, so each surplus is a clean triangle. With curved (non-linear) demand or supply the shape is no longer a triangle and you would integrate the area instead — treat this calculator as the standard introductory-microeconomics model.
Total surplus is market efficiency. The sum CS + PS is the total gains from trade. A competitive market at equilibrium maximizes this total — no other quantity produces more combined value for buyers and sellers.
Deadweight loss lives off equilibrium. When output is pushed away from the equilibrium quantity — by a price ceiling, a tax, a subsidy, or monopoly pricing — some mutually beneficial trades never happen. The lost surplus is a third triangle called deadweight loss, which shrinks the total below the $400 an efficient market would reach in the example.