PS Geometry
Producer Surplus is the shaded area below the price line and above the supply curve. A higher price pulls more sellers into the market, expanding total surplus.
Supply Theory
Opportunity Cost is the value of the next-best alternative given up.
Producer Surplus (PS) = Price Received - Cost
| Seller | Cost | Service | PS |
|---|---|---|---|
| Andy | ₹500 | Yes | ₹100 |
| Pablo | ₹600 | Yes | ₹0 |
| Claude | ₹800 | No | ₹0 |
| Vincent | ₹900 | No | ₹0 |
PRODUCER SURPLUS GEOMETRY & COST
PS = ₹100Producer Surplus (PS)
The Marginal Seller
The seller whose opportunity cost equals the market price. At P = ₹600, Pablo is the marginal seller — he breaks even with PS = ₹0.
Incentive to Produce
Higher prices make additional output profitable. When market price exceeds a seller's cost, the surplus motivates them to serve.
Resource Deployment
Sellers allocate extra capacity when returns rise. Andy deploys more ingredients when price climbs from ₹500 to ₹700.