Producer Surplus

What is producer surplus?

The producer surplus is a term referring to a producer’s gain from exchange. That is, the difference between the market price and the minimum price at which a producer is willing to sell something.

Total producer surplus -- or the sum of all the producer surplus for all sellers -- is measured on a graph by looking at the area above the supply curve and below the price.

In this video, we use walk you through an example of how to calculate total producer surplus, in the market for barrels of oil.