How to Calculate Producer Surplus and Consumer Surplus from Supply and Demand Equations

How to Calculate Producer Surplus and Consumer Surplus from Supply and Demand Equations | Think Econ

Рет қаралды 175,726

Жыл бұрын

In this video we explain how you can calculate Producer Surplus and Consumer Surplus step-by-step, starting with nothing but the supply and demand equations! We go over an algebraic solution to show you exactly how to calculate consumer and producer surplus given the demand and supply equations!
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Пікірлер: 131

@ThinkEcon Жыл бұрын

If you found this video helpful, consider supporting the channel by liking the video and subscribing to the channel to see more content like this! :)

@mphomadisha4215 Жыл бұрын

It literally made CS and PS simple wow, thanks. I need deadweight loss

@ThinkEcon Жыл бұрын

Glad to hear it! Here’s our deadweight loss video; kzfaq.info/get/bejne/ldZihc-IzMmUmok.html

@olebengmokhatu5904 11 ай бұрын

Dead weight loss

@ThinkEcon 11 ай бұрын

@@olebengmokhatu5904 Check out our Deadweight Loss video here: kzfaq.info/get/bejne/ldZihc-IzMmUmok.html

@hungnguyen-gs3oe 8 ай бұрын

thank a lot sir, you just saved my life.

@alassanemagassouba9420 Жыл бұрын

thank you so much; your explanations are so effective and easy to understand

@ThinkEcon Жыл бұрын

You're very welcome! I'm really glad to hear that :)

@Pianodaddyy Жыл бұрын

Liked and Subscribed! Thank you for your help!!!

@ibrahimathar1033 Жыл бұрын

thank you so much man, have an exam tomorrow morning and this came in clutch

@ThinkEcon Жыл бұрын

Glad to hear it! Good luck on the exam!

@user-oj5by9tu8e 10 ай бұрын

Thank you for clear explanations. liked and subscribed already :)

@ThinkEcon 10 ай бұрын

I’m glad you enjoyed the video! :)

@Lee-lee-w1r 18 күн бұрын

This is amazing. I understood it very well 🎉🎉🎉

@kikoferras7369 7 ай бұрын

God Bless you for this.

@capoags2438 Жыл бұрын

thank you so much, your explanations are so effective and easy to understand sir

@ThinkEcon Жыл бұрын

Glad to hear that!

@moseswamunyima3962 2 ай бұрын

Wow, you make it look easy! Thank you

@ThinkEcon 2 ай бұрын

I’m happy to hear that. You’re very welcome! ☺️

@owenthomas3621 Жыл бұрын

Great video

@KhimKhan 5 ай бұрын

Wow 10q man! keep it up 🎉🎉

@avtomerebashvili8145 2 ай бұрын

thanks for that simpliest explanation, u saved me

@ThinkEcon 2 ай бұрын

Glad I could help! :)

@user-kh8ug6nd8c 7 ай бұрын

Thankyou for the knowledge

@vihanga193 7 ай бұрын

so clear thanks

@akbotatoktarbekova2701 Ай бұрын

thank you! loved it, so simple

@ThinkEcon Ай бұрын

I’m glad you found it helpful!

@AuthenticallyAlysiaa Ай бұрын

SOOOO HELPFUL 😢😢. THANK YOU

@ThinkEcon Ай бұрын

You're welcome! I'm glad you found it helpful!

@cemilkolgu6579 Жыл бұрын

You are the best sir, thank you.

@ThinkEcon Жыл бұрын

You're very welcome!

@tahseentasneem3296 10 күн бұрын

Thank you so much ❤it was very helpful ❤

@ThinkEcon 10 күн бұрын

You're very welcome!

@freezymedia883 Жыл бұрын

Typing from Africa specifically zambia you have just helped me do my assignment

@ThinkEcon Жыл бұрын

I'm glad to hear that!

@user-bb7ih9uc5x 8 ай бұрын

Same category the man is doing the needful

@domnicedits1268 Ай бұрын

Zambia ku chalo

@priyanshukr.sharma2697 5 ай бұрын

this is really one of te finest explanation literally the best one

@ThinkEcon 5 ай бұрын

I appreciate the compliment! Glad you found it helpful! :)

@izzybellz5346 2 ай бұрын

❤ love your videos, very helpful..

@ThinkEcon 2 ай бұрын

I'm really glad to hear that! :)

@ooglyrat7010 5 ай бұрын

You saved my life honest to god 🙏🏻

@ThinkEcon 5 ай бұрын

Glad you found the video helpful! :)

@Mudenda_M 2 ай бұрын

This is great👍🏾😃

@ThinkEcon 2 ай бұрын

Thank you!

@ahmedbusiness4702 2 ай бұрын

Very good ❤

@Siyasat1 Жыл бұрын

Thank you !!

@ThinkEcon Жыл бұрын

You're welcome!

@KunaiKrazy Ай бұрын

To be honest, I didn't have the most recent version of a textbook for my Energy Economics class so I had no examples to go off of. All other tutorials, including CHATGPT did not mention finding the 0 value, 54 value, and made no mention of finding the difference between the 54 and the 18 value and then Basexheight/2. Thank you so much for this. I think I will go get the book because it should not have taken me this long.

@ThinkEcon Ай бұрын

I feel like most textbooks don't even go over that in much detail, which is a shame. We take a lot as given and I'm glad I was able to provide a truly step-by-step solution to walk you through it! You got this!

@abrahimshorbtli9714 4 ай бұрын

Amazing explanation thank you sir 🧠

@ThinkEcon 4 ай бұрын

You're very welcome!

@vishwarana8698 9 ай бұрын

Please share video for tax subsidies and quotas on supply n demand curve calculations 😊

@reepoponne 7 ай бұрын

Amazing video Thank you

@ThinkEcon 7 ай бұрын

You're welcome!

@victoriasepiashvili 9 ай бұрын

Amazing video ❤

@ThinkEcon 9 ай бұрын

Thank you very much :)

@andrewakr7205 Жыл бұрын

Thank you!

@ThinkEcon Жыл бұрын

You're very welcome!

@tharangiwattuhewa1782 3 ай бұрын

Thank you

@ThinkEcon 3 ай бұрын

You're welcome!

@user-bf1hv5dj7o Жыл бұрын

thank you sir 🙌👏

@ThinkEcon Жыл бұрын

You're most welcome!

@luckytenygeay4968 11 ай бұрын

Thanks u I learn something

@ThinkEcon 11 ай бұрын

You're welcome! I'm glad to hear that!

@alishaadhikari6108 Жыл бұрын

thank you so much

@ThinkEcon Жыл бұрын

You're very welcome!

@ampiireliz 9 ай бұрын

Thank you❤

@ThinkEcon 9 ай бұрын

You're welcome :)

@mankwongng185 5 ай бұрын

very useful !

@ThinkEcon 5 ай бұрын

Glad to hear it!

@abdallaabdullahi5942 Жыл бұрын

thank you

@ThinkEcon Жыл бұрын

You're welcome!

@carlanavarrofernandez5021 Жыл бұрын

amazing video

@ThinkEcon Жыл бұрын

Thank you very much!

@upsingh751 3 ай бұрын

superb sir ji. love from india

@ThinkEcon 3 ай бұрын

Glad you enjoyed!

@utkukrky698 7 ай бұрын

Thanksss ❤

@ThinkEcon 7 ай бұрын

You’re welcome!

@yahk3 8 ай бұрын

Very useful

@ThinkEcon 8 ай бұрын

Glad to hear it!

@user-no3ws6zp7j 5 ай бұрын

Exallent

@dulshansenadheera3084 10 ай бұрын

Thanks for the video..

@phindarishasohlang910 Жыл бұрын

Please calculate consumer surplus and producer surplus using integration

@tomascorreia7055 7 ай бұрын

could you explain the theory behind CS being above market price and below demand function and PS below market price and above supply function?

@ThinkEcon 7 ай бұрын

Absolutely. It has to do with a consumer's willingness to pay and a producer's willingness to sell. If you're willing to pay $20 for a t-shirt but only have to pay $5, then your consumer surplus is $15 in savings. Now on the supply and demand graph is area would be the triangle below the demand curve and above the equilibrium price of $5. This means that ANYONE with a willingness to pay above $5 receives a benefit, no matter if their willingness to pay was $6 or $600. On the producer side, imagine you're willing to sell a good as cheap as $10, but equilibrium price is $50. Then your producer surplus is $40. ANY seller whose willingness to sell is under $50 will experience producer surplus. On the graph this is the area below the selling price and above the supply curve. I hope this helps, if not, let me know and I can try to explain it even more clearly!

@vidurasampath8688 Жыл бұрын

Thanks 🇱🇰

@ThinkEcon Жыл бұрын

You're welcome!

@franb22 Жыл бұрын

gotcha!

@syndafloden333 7 ай бұрын

ure a god man

@peacekeeper-apexlegends9294 Жыл бұрын

Thank you so much! If you don't mind, how do I go about it if my demand and supply functions are different? If they look like this: Demand function: P(Q) = 5-0,0000001Q Supply function: P(Q) = 0,0000001Q I found the equilibrium price and quantity by putting both functions equal to each other, and then solving. And then the other was found by inputting the new value into one of the original functions just like you did. I got Equilibrium price = 2,5 and quantity = 25000000 My question is, how do I find where the demand function crosses the X and Y axis? There is no P in my function, so I'm a little bit confused.

@ThinkEcon Жыл бұрын

So what you've got is something called the inverse demand function. Instead of Q on the left side of the equation, it's P. For calculating the X and Y intercepts, you just set P and Q equal to zero one at a time, and solve for the other value. Does this help?

@peacekeeper-apexlegends9294 Жыл бұрын

@@ThinkEcon Oh I see, thank you very much!! So for the demand function, I would basically be able to straight out read the y-intercept from this type of function by looking at the first number, in this case 5 right? Since the other part in the function would always result in 0?

@ThinkEcon Жыл бұрын

@@peacekeeper-apexlegends9294 yes, that’s exactly correct! In fact, the inverse demand function is already in y = mx + b form, ready to be graphed (like you said). The regular demand equation is actually not what you’re graphing since it interprets the dependent variable (y variable) as Q instead of P. They’re the exact same equations, just rearranged!

@peacekeeper-apexlegends9294 Жыл бұрын

@@ThinkEcon Appreciate it thank you, earned a sub! Your content have helped me out so much!

@ThinkEcon Жыл бұрын

@@peacekeeper-apexlegends9294 I’m glad it’s been helpful, and appreciate the kind words :)

@eatloaf Жыл бұрын

Great content but i noticed that the question i have here is quite different yours; qs= p=2q/3 + 1 and qd= p=10_2q how do i approach this please?

@ThinkEcon Жыл бұрын

First things first. You’re working with something called the INVERSE demand and supply equations. This is where P is isolated and Q is in the equation instead of the other way around. Luckily for you, solving requires the same steps, so at equilibrium both price AND quantity are equal. In your case, you would set the P equations equal to each other and solve for Q. Once you have Q, sub it back into either the inverse supply or inverse demand equation to get equilibrium P. Does this help?

@outstanding8240 Жыл бұрын

HI, the 270 and the 10 are random values that the professor has added or it is the actual base formula?

@ThinkEcon Жыл бұрын

Those are the actual values in this particular example. They will change question to question

@delealabi1866 10 ай бұрын

I was bemused as to how the figures just materialized. Thanks for clearing this. @@ThinkEcon

@ThinkEcon 10 ай бұрын

My pleasure! Every question's figures will be different, but to show you the math involved, I did need to include values of my own! @@delealabi1866

@munachinweze3694 Жыл бұрын

How did you get the figures that you used for quantity supplied and quantity demanded

@ThinkEcon Жыл бұрын

The supply and demand equations, you mean? They’ll always be given to you, or at the very least, be given as a one-step problem

@calmingarts2932 2 ай бұрын

What is meant by consumer and producer surplus in the market equilibrium graph? Why would you need to use the area of a triangle in order to work out the producer and consumer surplus? Thank you.

@ThinkEcon 2 ай бұрын

The idea is that consumer surplus is all of the value the consumers receive from purchasing something that was cheaper than their "reservation price" or the maximum they're willing to spend on the good. The triangle formed under the demand curve and above the equilibrium price represents that amount. The lower the price, the bigger the triangle, and therefore the bigger the consumer surplus, since consumers save more money. The exact opposite is true on the supply side. Producers benefit more from a high price, and so as the price goes up, producer surplus increases. I hope this helps :)

@calmingarts2932 2 ай бұрын

@@ThinkEcon Thank you 😊

@ryanantoun6887 9 ай бұрын

are Qd = 270 -5p and Qs = 10P equations used for every single problem?

@ThinkEcon 9 ай бұрын

Great question! No, each question will have different Qd and Qs equations. They are known as the Demand and Supply Equations and represent the lines you see on a standard Supply and Demand graph! I just used these equations for the example but the steps will work for any Qd and Qs equations

@mirzaseyab6206 5 ай бұрын

What about if demand and supply curves are not lines ? If they are quadratic...

@user-nt9sf4cm3l 10 ай бұрын

Can the supply curve start from any number apart from 0?

@ThinkEcon 10 ай бұрын

Yes. Remember, as supply curve will often take on the linear form y = mx + b where m is the slope, and b is the y intercept. Any time b is a non-zero integer, the supply curve will start apart from zero!

@xay8336 Ай бұрын

Sir, where did you got the number '270' & '5P'? please help

@ThinkEcon Ай бұрын

Q = 270 - 5P is the equation for the demand curve. Most of the time the specific demand equation will be given in the question.

@greenwaddledee1743 Ай бұрын

Good luck on your exams yall

@JosephineMulenga-ol4nt 8 ай бұрын

How is the base of the producer's supply becoming 80?

@AlbertChanda-oy9m 3 ай бұрын

❤

@derickdoh2526 Жыл бұрын

Hi Can You Help Me Find The Consumer Surplus At A Price Of $10 Given The Equations Qd=20-P and Qs= P ?

@ThinkEcon Жыл бұрын

Of course! P= $10 Equilibrium Q = 10 Find Y-intercept of demand curve: Set Qd = 0 and solve for P. 0 = 20 - P P = 20 Therefore y-int is 20. Calculate area of the Consumer Surplus triangle: CS = (b*h)/2 CS = (10*10)/2 CS = 100/2 CS = $50 Hope this helps!

@derickdoh2526 Жыл бұрын

@@ThinkEcon Okay. I've Got Another One. Qd=30-P Qs=2P Find The Consumer Surplus At A Price Of $15

@Kermitsbgc Жыл бұрын

i don't know who needs to hear this, but chatgpt will help you study and explain math for you

@Makbowman 5 ай бұрын

Don’t trust it. Especially if you have variables like Pb*, it doesn’t understand them well and confuses you more. I corrected ChatGPT many times and it ‘apologized’ for its mistakes

@engravedwithelegance3651 5 ай бұрын

It sure does

@aaaaaaaaaaaaaaaa7498 4 ай бұрын

Inaccurate

@AlbertChanda-oy9m 3 ай бұрын

✔️@@aaaaaaaaaaaaaaaa7498

@jaredcobbett6951 Ай бұрын

@@Makbowmanthat’s amazing it apologises 😂