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.
Animated graph
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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.
Paper 2 asked in May 2024 what a higher minimum price does to consumer surplus, for 4 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.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
Animated graph
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 |