Many buyers would pay more than the market price. The extra they keep is consumer surplus.
Our example (made-up numbers): three buyers, one price of €6
Ana would pay €9
Pays €6.
Ben would pay €7
Pays €6.
Cal would pay €6
Pays €6.
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The points to remember
- Consumer surplus: the most buyers would pay minus what they actually pay.
- On the diagram: the area under D and above the price, up to the quantity bought.
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Many sellers would accept less than the market price. The extra they receive is producer surplus.
Our example (made-up numbers): three sellers, one price of €6
Dev would accept €3
Gets €6.
Eli would accept €5
Gets €6.
Fay would accept €6
Gets €6.
Animated graph
Watch the graph build step by step in study mode.
The points to remember
- Producer surplus: what sellers receive minus the least they would accept.
- On the diagram: the area above S and below the price, up to the quantity sold.
Remember it as: Consumers above the price, producers below it.
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Add the two and you have social (community) surplus: the total gain from trade in the market.
Animated graph
Watch the graph build step by step in study mode.
The points to remember
- Social surplus = consumer surplus + producer surplus.
- At equilibrium, marginal benefit = marginal cost (MB = MC).
- Social surplus is maximised there: the market is allocatively efficient.
At Higher Level, Paper 3 asks you to calculate these areas from a diagram. Each is a triangle, or the change between two triangles.
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How the 2 marks are given
Mark 1: valid working
Write the formula with the numbers: ½ × 40 000 × 4. One correct triangle is enough for this mark.
Mark 2: the answer with units
€80 000. Leave out the € or the units and you lose a mark.
A change in surplus
Subtract the triangles, or use ½ × (Q1 + Q2) × change in price: ½ × (40 000 + 30 000) × 1 = €35 000.
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Paper 2 asked in May 2024 what a higher minimum price does to consumer surplus, for 4 marks. Paper 3 asks for a surplus calculation every year, for 2 marks.
Text E says that the minimum fare charged by private bus drivers may be raised further above the equilibrium price.
Using a demand and supply diagram, explain what is likely to happen to consumer surplus.
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See the answer broken into clear points, with guidance on how each point earns marks.
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Watch the graph build step by step in study mode.
What the diagram must show
- Axes P and Q; curves D and S; Pe and Qe.
- A minimum price Pmin drawn above Pe, with the lower quantity Qd.
- Consumer surplus shaded: the smaller triangle above Pmin.
How the 4 marks are given
| Marks | What your answer needs |
|---|---|
| 3–4 | A correct diagram and a correct explanation |
| 1–2 | A correct diagram or a correct explanation, not both |
| 3 at most | A diagram with a wrong or missing label |