What is Producer Surplus?
- Producer surplus is the difference between the price that producers receive for supplying a good and the marginal cost of producing it.
How Do I Remember It?
- Think of producer surplus as the “producer’s bonus.” It’s like the extra benefit or profit that producers get from selling their goods or services above what they would be willing to accept.
Real World Example
- For example, consider a coffee producer who is willing to sell a bag of coffee beans for $10 but can sell it in the market for $15. The producer’s surplus would be $5 ($15 – $10), representing the additional benefit gained from selling the coffee beans at a price higher than their minimum acceptable price.
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By: Ryan Aquino
