In the field of economics, what is producer surplus?
Producer Surplus is the difference between what a producer is paid, and what a producer was willing to take for a particular good or service.
- A car company might be willing to take $30,000 for producing and selling a new car. But the car sells for $35,000. Producer surplus = $5,000.
- A cotton farmer might be willing to take $.65 per pound for his cotton harvest. But he sells it for $.75 per pound. Producer surplus = $.10 per pound.
- And I might be willing to take $2.00 for a used book. But that does not keep me from selling the book for $17.00.