So we've talked about Consumer Surplus, now let's talk about the other side of the coin, Producer Surplus, right? Maybe you found something lying around the house that you're like, hey, if I could sell this on eBay for $5, that'd be awesome. Right? And you put it on eBay, it ends up being a collector's item and it sells for $50. You would have sold it for $5 right? Hey, so you've had some producer surplus. Let's dive in. Alright, so you're going to see a lot of parallels here between what we do here and what we did with consumer surplus. It's just a lot of it's kind of the other way around. So when we talked about willingness to pay right, that was the maximum that someone was willing to pay, a consumer was willing to pay. Well, willingness to sell is going to represent the minimum price for one of the suppliers to sell their thing, right? So the minimum price is the willingness to sell and we're just going to see just like the demand curve represented the willingness to pay, we've got the supply curve is going to represent our willingness to sell. Okay. So, surplus. We're talking about producer surplus, but surplus is still good deals, right? We're talking about the good deals. We're now just talking about good deals for the producer, right? So this is when they're willing to sell for less than the market price, right? And when we talk about this willingness to sell, right, everyone's kind of going to have a different willingness to sell. You could maybe think about maybe this company that produces teddy bears, right, and they produce them, you know, maybe they're willing to sell them for $10 and the market price is $20 right, and they have some surplus there, but you have your teddy bear at home, you know, your teddy bear, that teddy bear and you're not going to have that same willingness to sell, right? You probably wouldn't get rid of your teddy bear for $10 right? That teddy bear's got some serious emotional value in there that's going to bring that willingness to sell way up. Alright, so that's kind of willingness to sell is going to be different for each supplier and that's where we're going to get this producer surplus where we get the market price minus that willingness to sell, alright? And just like the willingness to pay, our demand curve represented marginal benefit, the willingness to sell and our supply curve is going to represent our marginal cost to society. Okay. So the idea here is you know that company is willing to sell those teddy bears for $10 right, but the market price is $20 for a teddy bear, the marginal cost is still going to be that $10 that they're willing to sell it at, right? Because they would have got rid of it at 10, they're just getting that surplus, that extra money, so the idea here not to over complicate is that that supply curve is going to represent our marginal cost. Okay, so let's go ahead and do just like we did with consumer surplus, let's do a small setting example of producer surplus here. So I've got 4 names I picked at random right? Bart, Lisa, Marge, and Homer and they're going to be producers in this market and just like before, we're going to have only one thing per person, right? They're not going to be selling multiple units. Each person is just going to sell 1. They each have one of this. Maybe it's that golden cheesy poof, right? They each have one to sell, and let's go ahead and draw their supply curve in this small market. So let's start with Homer, right? When the price is low, Homer's going to be the only one that sells. So at a price of $2, Homer is the only one getting in the market, and there will be one supplied. How about when the price rises to $4? Now Homer will sell, but also Marge. So we'll have 2 supplied at a price of $4. Same thing here at a price of $6, you'll see Lisa get in the market. So 3 will be supplied, and finally, everybody sells when the price is at least 8 dollars right? So let's go ahead and drive or draw our supply curve and remember we're not going to get that straight line because we're still in a small setting. We're going to get that jagged kind of supply curve until we have a lot more sellers. Right? So in this small market, we're going to have this shape. Right? And we draw it this way because it makes sense. If the price was $3 or something, you can always double-check right. At this price of $3, the quantity is 1 which is still correct right because Homer is the only one who sells at a price of $3 so the quantity should still be 1 there. Alright, so let's go ahead and calculate producer surplus at different price levels. I'm going to get out of the way here. We're going to start with the low price of $4 and then raise the price to see how as the price increases, the producer surpl
Table of contents
- 1. Introduction to Macroeconomics1h 57m
- 2. Introductory Economic Models59m
- 3. Supply and Demand3h 43m
- Introduction to Supply and Demand10m
- The Basics of Demand7m
- Individual Demand and Market Demand6m
- Shifting Demand44m
- The Basics of Supply3m
- Individual Supply and Market Supply6m
- Shifting Supply28m
- Big Daddy Shift Summary8m
- Supply and Demand Together: Equilibrium, Shortage, and Surplus10m
- Supply and Demand Together: One-sided Shifts22m
- Supply and Demand Together: Both Shift34m
- Supply and Demand: Quantitative Analysis40m
- 4. Elasticity2h 26m
- Percentage Change and Price Elasticity of Demand19m
- Elasticity and the Midpoint Method20m
- Price Elasticity of Demand on a Graph11m
- Determinants of Price Elasticity of Demand6m
- Total Revenue Test13m
- Total Revenue Along a Linear Demand Curve14m
- Income Elasticity of Demand23m
- Cross-Price Elasticity of Demand11m
- Price Elasticity of Supply12m
- Price Elasticity of Supply on a Graph3m
- Elasticity Summary9m
- 5. Consumer and Producer Surplus; Price Ceilings and Price Floors3h 40m
- Consumer Surplus and WIllingness to Pay33m
- Producer Surplus and Willingness to Sell26m
- Economic Surplus and Efficiency18m
- Quantitative Analysis of Consumer and Producer Surplus at Equilibrium28m
- Price Ceilings, Price Floors, and Black Markets38m
- Quantitative Analysis of Price Ceilings and Floors: Finding Points20m
- Quantitative Analysis of Price Ceilings and Floors: Finding Areas54m
- 6. Introduction to Taxes1h 25m
- 7. Externalities1h 3m
- 8. The Types of Goods1h 13m
- 9. International Trade1h 16m
- 10. Introducing Economic Concepts49m
- Introducing Concepts - Business Cycle7m
- Introducing Concepts - Nominal GDP and Real GDP12m
- Introducing Concepts - Unemployment and Inflation3m
- Introducing Concepts - Economic Growth6m
- Introducing Concepts - Savings and Investment5m
- Introducing Concepts - Trade Deficit and Surplus6m
- Introducing Concepts - Monetary Policy and Fiscal Policy7m
- 11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)1h 37m
- Calculating GDP11m
- Detailed Explanation of GDP Components9m
- Value Added Method for Measuring GDP1m
- Nominal GDP and Real GDP22m
- Shortcomings of GDP8m
- Calculating GDP Using the Income Approach10m
- Other Measures of Total Production and Total Income5m
- Consumer Price Index (CPI)13m
- Using CPI to Adjust for Inflation7m
- Problems with the Consumer Price Index (CPI)6m
- 12. Unemployment and Inflation1h 22m
- Labor Force and Unemployment9m
- Types of Unemployment12m
- Labor Unions and Collective Bargaining6m
- Unemployment: Minimum Wage Laws and Efficiency Wages7m
- Unemployment Trends7m
- Nominal Interest, Real Interest, and the Fisher Equation10m
- Nominal Income and Real Income12m
- Who is Affected by Inflation?5m
- Demand-Pull and Cost-Push Inflation6m
- Costs of Inflation: Shoe-leather Costs and Menu Costs4m
- 13. Productivity and Economic Growth1h 17m
- 14. The Financial System1h 37m
- 15. Income and Consumption52m
- 16. Deriving the Aggregate Expenditures Model1h 22m
- 17. Aggregate Demand and Aggregate Supply Analysis1h 18m
- 18. The Monetary System1h 1m
- The Functions of Money; The Kinds of Money8m
- Defining the Money Supply: M1 and M24m
- Required Reserves and the Deposit Multiplier8m
- Introduction to the Federal Reserve8m
- The Federal Reserve and the Money Supply11m
- History of the US Banking System9m
- The Financial Crisis of 2007-2009 (The Great Recession)10m
- 19. Monetary Policy1h 32m
- 20. Fiscal Policy1h 0m
- 21. Revisiting Inflation, Unemployment, and Policy46m
- 22. Balance of Payments30m
- 23. Exchange Rates1h 16m
- Exchange Rates: Introduction14m
- Exchange Rates: Nominal and Real13m
- Exchange Rates: Equilibrium6m
- Exchange Rates: Shifts in Supply and Demand11m
- Exchange Rates and Net Exports6m
- Exchange Rates: Fixed, Flexible, and Managed Float5m
- Exchange Rates: Purchasing Power Parity7m
- The Gold Standard4m
- The Bretton Woods System6m
- 24. Macroeconomic Schools of Thought40m
- 25. Dynamic AD/AS Model35m
- 26. Special Topics11m
5. Consumer and Producer Surplus; Price Ceilings and Price Floors
Producer Surplus and Willingness to Sell
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