Explanation:
Consumer Surplus:
The consumer surplus is defined as the difference between the consumer's willingness to pay for a good, and the actual price of the good. Its the area between the demand line and the horizontal line cutting the equilibrium point.
It can be calculated as
[tex]ConsumerSurplus = \frac{1}{2} * Q_{Equilibrium} * (P_{max} - P_{equilibrium})[/tex]
Producer Surplus:
The producer surplus is defined as the difference between the producer's willingness to supply a good for a certain price, and the actual price of the good. Its the area between the supply line and the horizontal line cutting the equilibrium point.
It can be calculated as
[tex]ProducerSurplus = \frac{1}{2} * Q_{Equilibrium} * ( P_{equilibrium} - P_{min})[/tex]
