Right here, the quantity exchange is this quantity low. Those trades are not happening at the low price, right? If we're at this low price, let's think about this real quick at this low price. Right? That might be your first guess at what our consumer surplus is going to be. Right? So you might think at first that it's gonna be this whole area here, including B. So in this case, it's gonna be everything above the price of P. ![]() Let's go ahead and see what happened to producer surplus. So what are we gonna see that's happening? Um Let's talk about consumer surplus first. So now let's talk about consumer surplus and producer surplus at P. So I'm gonna go ahead and um erase these colors and let's do the same thing at the low price. So producer surpluses everything below the price, above the supply curve, right? And that's gonna give us this triangle, the one we're used to, right? So remember an equally equilibrium, we've got our maximum uh surplus, our maximum economic surplus, which is everything is gonna be surplus. And let's go ahead and do the same thing with producer surplus. Is the area that makes consumer surplus there. You're gonna see is our consumer surplus. Um So that area is gonna be our consumer surplus, right? A plus B. So just kind of follow along here and see where I'm going. Um And I wouldn't I suggest you don't go ahead shading everything, cause I'm gonna be uncovering stuff and we're gonna be making different areas out of this graph. So first at equilibrium, we've got our consumer surplus, which is everything above the price, right? So our equilibrium price was right here, right? The P. So we've got those five different areas of the graph kind of cut off by those dotted lines, right? So let's talk about consumer surplus and producer surplus in each of these situations, and then we'll talk about dead weight loss. What do you think about this last one? I'm E. So quantity low here, I'm gonna put as well so I'm gonna go ahead and label these boxes these different areas of the graph, I'm gonna call this area A. Um which is true, you're gonna see that consumers do benefit from that still but let's see what happens um in this situation. Star, right? But now let's go ahead and say that the price is set too low, right? And you as a consumer you're like yeah low price. Right? So let's go ahead and look on this graph um we're gonna see we've got these different prices, right? We had our equilibrium price here, P Star and Q. So if we're not an equilibrium it's called a deadweight loss that that emerges here and that comes from the inefficiency of not being at equilibrium. So let's go ahead and see a situation where we're not at equilibrium, right? So we're going we have what's called a deadweight loss when we're not at equilibrium. Right? So this is the case where it's maximized, right? We're gonna have the most area between the supply and demand curve when we're at equilibrium. But above the supply curve, right? And that's gonna give us this area in green, Right? So when we add the green area the producer surplus with the consumer surplus, that is where we get our total surplus or economic surplus. And what do we have at that price? Our consumer surplus is going to be this purple area that I'm highlighting now, right, everything below the demand curve, but above uh price, right? That's our consumer surplus, which I'll write out here, and now let's do the same thing with producer surplus, that's gonna be everything below the price. But just to be clear, we have this price of P star, right, We are at equilibrium, we've got P star Q star our equilibrium price and equilibrium quantity. ![]() Right? So what's going on here? We've got our maximum surplus in this case, and I'm gonna show you why in a second. Look at this uh kind of standard um supply and demand graph here, right, we've got our price, access our quantity, access our downward demand, double Ds upward supply. Okay, So when we have that equilibrium, that is when we are going to have maximum surplus. We want to maximize surplus as well here, and that's gonna be when the market is in equilibrium. ![]() We talk about maximizing a lot, maximizing profit, maximize revenue. So when are we going to maximize surplus? Right. We're gonna call it our total surplus as well, right? Total surplus. All right, so it's gonna be our total surplus here. So we're gonna have this idea of economic surplus and economic surplus is the sum of the consumer surplus and the producer surplus. Now let's see what happens when we put producer surplus and consumer surplus together on the same graph.
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