Alright. So now let's extend that idea of producer surplus to the entire market. So, like we see here in the green box, we've got the area below market price, right, and above the supply curve. That's going to be our producer surplus just like we kind of saw in the examples in the small market. We're going to see it going on here. So let's start with this original producer surplus before we change the price. We've got our price axis here, our quantity axis, and say that there's this price on the market, right, whatever the market price is, and we're going to supply this quantity at that price. Right? And notice that now we've got our smooth supply curve. It's no longer that jagged curve that we saw before, and this is because there's a lot of suppliers now. Right? Before we had, you know, Homer supplying at $2, Mark at $4. Well, now there are suppliers that will supply at $3, at $3.5, right? All the willingness to sell, of all these multitude of suppliers now, and that's going to smooth out our curve and give us this straight line, and we got that upward supply, right? We had that downward demand; supply is the other one that goes upwards. Cool. So at this price p, what is our producer surplus? Well, it's going to be that area below market price and above the supply curve. So I'm going to highlight it here in this purple. Right? And you see that we get a triangle again. Right? We've got this triangle, and we could, right, theoretically get the area of this triangle if we had the right information, right, we'd need some information about what that quantity is, we'd have our base and our height, right, And we could figure out what that producer surplus is. We might need this number right here too. What's that minimum supply?

Well anyhow, let's go ahead and see what happens when we decrease the price, right? So when you decrease the price, what would you expect to happen to producer surplus? Would you expect producer surplus to increase or decrease? Well, the idea is that it's going to decrease, right? It's going to decrease because fewer people are willing to sell at a lower price. It goes back to that law of supply, lower price, fewer people supplying, less quantity supplied. So let's go ahead and see what happens here to our producer surplus. So, right, we had that original price, P, but let's say we were at this low price. We'll say PL again. PLow, L for low. Right? So our original surplus for the producers was this whole purple area just like we had on the other side, right? That whole triangle, I'm going to get rid of it and let's go ahead and highlight our new producer surplus in purple, right. So we expected it to decrease, we've got this low price of PL and it's going to be everything below the market price and above the supply curve. So we're going to get this little baby area right there is going to be our remaining producer surplus after the price decrease. So what happened to our Producer Surplus? Where did it go? Well first we're going to see that producers that are still selling, right, they're still selling at this lower price because the lower price is still above their willingness to sell or equal to their willingness to sell, they're still going to sell but they're going to lose surplus because the price dropped and that's represented by this green area right here. That green rectangle represents the surplus lost to the suppliers that are still in the market. Right? And just like with consumer surplus, the price change is going to drop these producers out of the market. Right? So this blue triangle represents suppliers that were selling at the higher price, but now that the price has decreased, their willingness to sell is above that price and they're no longer going to sell, right? So we lose that producer surplus from those people that exited the market, right?

So when they ask us questions, right, we could calculate the area. They could ask us to calculate the original producer surplus, right, and that's the entire area. That was the original surplus before the price change, but now we've got our new surplus, right? What is the remaining producer surplus? They could ask you to calculate that triangle right there. They could ask you, hey, what is the surplus lost by the people still selling? And that's going to be this rectangle, right? Or they could say what is the surplus lost because people left the market? And the producer surplus that we lost is the blue area because people left the market. Right? So if we had the right data, numbers for prices, numbers for quantities, we'd be able to calculate these areas and find out what these different parts of producer surplus are. So remember, it's going to be the area below the market price and above the supply curve. Alright, we've still got just like before, right the discussions and explanations. So let's go ahead and do some examples, some practice, and let's get this producer surplus stuff down pat. Alright. Let's do that in the next video.