Producer surplus

Producer surplus is the difference between the price sellers receive and the minimum they would accept. In a market, it measures sellers’ gains from trade above their reservation prices or costs.

Supply curve: A graph or function showing how much sellers offer at different prices. Its height represents sellers’ marginal costs, whose gap below market price creates surplus.
Economic surplus: The gains from exchange, measured by the difference between participants’ benefits and costs. Producer surplus is the seller-side component of this broader measure.
Price ceiling: A legal maximum price that sellers may charge for a good or service. A binding ceiling can reduce the price and quantity sold, lowering sellers’ gains.
Total surplus: The sum of consumer and producer surplus in a market. It combines sellers’ gains with buyers’ gains to assess the market’s overall benefits.
Marginal cost: The additional cost of producing one more unit of a good or service. In competitive markets, marginal cost helps set each unit’s minimum acceptable selling price.
Opportunity cost: The value of the best alternative forgone when a choice is made. A seller’s minimum acceptable price reflects what production sacrifices elsewhere.
Price floor: A legal minimum price that sellers may charge for a good or service. A binding floor can raise sellers’ price while leaving some output unsold.
Pareto efficiency: An allocation is Pareto efficient when no one can be made better off without making someone else worse off. Surplus-maximizing trade is connected to efficiency under standard competitive-market assumptions.
Market equilibrium: A market condition in which quantity supplied equals quantity demanded at a particular price. Equilibrium price determines the revenue sellers compare with their costs.
Willingness to accept: The minimum compensation a person requires to give up a good or provide a service. It generalizes the seller’s minimum acceptable price beyond production-cost examples.

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