What do consumer and producer surplus represent?
Consumer surplus is the benefit to people who want to buy a certain good that comes from the good being cheaper than what the consumer would be willing to pay; in other words, it is the difference between the highest price the consumer is willing to pay, and the current market price of the good. Producer surplus, similarly, is the difference between the lowest price the producer is willing to receive for the good, and the current market price. Producer surplus can be thought of as a kind of profit, and consumer surplus as savings. Together, the two make up economic surplus.
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