According to N.G. Mankiw, "Producer's surplus is the amount a seller is paid minus the cost of production. It measures the benefit sellers receive from participating in a market."
In short, a Producer's surplus is the amount received by a seller less the cost of the seller.
Symbolically;
P.S = R - C.S
Where,
P.S = Producer's Surplus
R = Revenue or amount received by the seller
C.S = Cost of Seller
The concept of the Producer's surplus can also be explained with the help of the following diagram:
In the figure above, price and quantity are represented in the Y-axis and the X-axis respectively. The upward-sloping SS curve represents the supply curve. It shows that at OP price the producer's surplus is equal to the area of triangle PSA.
Mathematically;
Producer's surplus = Area of Δ PSA
= (1/2) x Base x Height
= (1/2) x PA x PS
= (1/2) x OQ x PS [∵ PA = OQ]
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