Calculate producer surplus from market price, minimum selling price, and quantity sold, or from linear demand and supply curves for equilibrium.
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Producer Surplus Formula
The following formula calculates producer surplus when every unit has the same minimum acceptable (reservation) price. For an upward-sloping linear supply curve, use the equilibrium curve mode and its triangular surplus area.
- Where PS is the producer surplus
- MP is the market price (actual selling price per unit).
- M is the constant minimum acceptable price per unit across the quantity sold.
- QS is the quantity sold.
For a constant reservation price, subtract that minimum acceptable price from the market price, then multiply by the quantity sold. Use matching currency and quantity units.
Producer Surplus Definition
Producer surplus is the amount sellers receive above the minimum amounts they would accept for the units sold. In a standard supply diagram it is the area below market price and above supply up to the traded quantity; it is not net profit after fixed costs.
Producer Surplus Example
How to calculate producer surplus?
- First, determine the market price.
This is the actual selling price of the good.
- Next, determine the minimum price.
This is the minimum price the producer could sell the good for.
- Next, determine the quantity sold.
Measure the quantity sold at the market price.
- Finally, calculate the producer surplus.
Using the formula above calculate the producer surplus.
FAQ
Producer surplus is the amount received above sellers’ minimum willingness to accept for the units sold. It is the area below market price and above supply; the rectangular formula here assumes a constant reservation price.

