In general, if other factors remain constant, an increase in the market price increases the producer`s surplus, and a decrease in the supply price or marginal costs will also increase the producer`s surplus. In the context of social assistance, the amount of the producer`s surplus depends on many factors. If the manufacturer can sell the product at the highest price, the well-being is the greatest. If the supply price is constant, the welfare of producers depends on the market price. The producer`s surplus is usually used to measure the economic well-being that the manufacturer receives in the market supply. If a producer sells a good at a price higher than the minimum price at which he is willing to sell, he receives a surplus. If a consumer evaluates an item for less than they would be willing to pay, the consumer gets a surplus. Here`s the formula: This economic measure is used to assess well-being in markets. The total surplus will therefore be $7 ($3 + $4). In the previous example, the total consumer surplus was $3 and the producer`s total surplus was $4. By subtracting the producer`s total cost (the triangle under the supply curve) from its total income (the rectangle), the producer`s total benefit (or surplus) is indicated as the area of the triangle between P(i) and the supply curve. Since the supply curve represents the marginal cost of production of each unit of the product, the total cost of production of the units Q(i) of the product by the manufacturer is the sum of the marginal cost of each unit from 0 to Q(i) and is represented by the triangular area under the supply curve from 0 to Q(i).
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