It isn't just consumers who enjoy a surplus from transactions, it's producers as well. Since we haven't yet studied the behavior of firms we'll keep our discussion of producer surplus brief, but the idea is similar to consumer surplus.

    We show, to the right, that if the market price were $2 the firm, whose supply curve is shown, would be willing to supply one unit. If the price were $4 it would supply 2, and so on. We can think of $2 as its marginal sale price on the first unit, $4 as its marginal sale price on the 2nd, and so on. At a price of $14 it will supply 8 units. Even though it's willing to sell units 1-7 for below $14, the way markets usually work it ends up selling all 8 units at $14 each, giving it a revenue of $14 x 8 = $112.

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