2.6 Market Equilibrium and Consumer and Producer Surplus
Equilibrium is where quantity demanded equals quantity supplied; there, consumer plus producer surplus is maximized and the outcome is allocatively efficient.
Market equilibrium is the price where quantity demanded equals quantity supplied — the intersection of the two curves. At any other price, shortage or surplus pressure pushes the market back toward it.
Consumer surplus is the gap between what buyers are willing to pay and the price they actually pay: the triangle below the demand curve and above the price line. Producer surplus is the gap between price and sellers' minimum acceptable price (their marginal cost): the triangle above the supply curve and below the price line. Each triangle's area is ½ × base × height on linear curves.
Total surplus (consumer + producer) is maximized at the equilibrium quantity, which makes the free-market outcome allocatively efficient when there are no externalities. Every unit worth more to buyers than it costs sellers gets produced, and no unit that costs more than it is worth does.
Key terms for 2.6
Drag the curves yourself — the fastest way to make 2.6 stick.
Practice the math
Shading the surpluses on the wrong side of the price line. Consumer surplus sits BELOW demand and ABOVE price; producer surplus sits ABOVE supply and BELOW price — swapping them is an instant lost point.
Get AP Econ exam tips in your inbox
Occasional emails with study tips, new interactive graphs, and exam-season reminders. Free — no spam.
No spam. Unsubscribe anytime.