# "How to Calculate Surplus and Deadweight Loss on a Graph"

Learn how to calculate consumer surplus (CS), producer surplus (PS), total surplus (TS), and deadweight loss (DWL) on a graph in a market with demand (D) and supply (S) curves. Example given for Q 200-600 and prices 2-12.

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## About "How to Calculate Surplus and Deadweight Loss on a Graph"

PowerPoint presentation about '"How to Calculate Surplus and Deadweight Loss on a Graph"'. This presentation describes the topic on Learn how to calculate consumer surplus (CS), producer surplus (PS), total surplus (TS), and deadweight loss (DWL) on a graph in a market with demand (D) and supply (S) curves. Example given for Q 200-600 and prices 2-12.. The key topics included in this slideshow are . Download this presentation absolutely free.

## Presentation Transcript

Slide1Consumer Surplus (CS),Producer Surplus (PS), Total Surplus (TS), & Deadweight Loss (DWL)

Slide2Do You Know How toCalculate on a Graph …? Consumer Surplus (CS) Producer Surplus (PS) Total Surplus (TS) Deadweight Loss (DWL)

Slide3CS, PS, TS, & DWL\$ Q 200 400 600 2 4 6 8 10 12 D Given the D & S curves in a market as shown, S

Slide4CS—The Benefits to Buyers(Equivalent to Bargain/Saving) \$ Q 200 400 600 2 4 6 8 10 12 D CS is the shaded triangle. Its value equals the area of the triangle, or half or a rectangle. The formula is: area = base x ½ height. So CS = (300 x ½ x (12-6)) = \$900. S

Slide5PS—The Benefits to Sellers(Equivalent to Gross Profit) \$ Q 200 400 600 2 4 6 8 10 12 D PS is the shaded triangle. Its value equals the area of the triangle. So PS = base x ½ height = (300 x ½ x (6-2)) = \$600. S

Slide6TS = CS + PS = Maximum(TS Is Maximized in a Free Market) \$ Q 200 400 600 2 4 6 8 10 12 D In a free market, TS, the sum of CS and PS, measures the total maximum benefits to all market participants. TS = CS + PS = \$900 + \$600 = \$1,500. S

Slide7DWL\$ Q 200 400 600 2 4 6 8 10 12 D Given the D & S curves, suppose that the government imposed a per-unit tax (T) on the market as shown. What would happen? S

Slide8TS = CS + PS < Maximum(DWL Is the Loss/Reduction in TS) \$ Q 200 400 600 2 4 6 8 10 12 D CS would decrease; PS would decrease; GTR would rises, TS would decrease; and a DWL would exist. S CS after tax PS after tax Government Tax Revenue (GTR) DWL GTR = \$3 x 200 = \$600; and DWL = ½ x 3 * 100 = \$150

Slide9Now You Know How toCalculate on a Graph … Consumer Surplus (CS) Producer Surplus (PS) Total Surplus (TS) Deadweight Loss (DWL)