Bpp learning Media is an acca approved Content Provider

equilibrium price
.
The forces of supply and demand push a market to its equilibrium price and quantity. Note carefully the 
following key points. 
(a) 
If there is no change in conditions of supply or demand, the 
equilibrium price will prevail
in the 
market and will remain stable. 
(b) 
If price is not at the equilibrium, the market is in 
disequilibrium 
and supply and demand will 
push prices towards the equilibrium price. 
(c) 
In any market there will only be one equilibrium position where the market is cleared. 
(d) 
Shifts in the supply curve or demand curve will change the equilibrium price (and the quantity 
traded). 
6.3 Consumer surplus and producer surplus 
The 
marginal utility 
derived by different consumers from consumption of a unit quantity of a good will 
vary and so, therefore, will the price they would offer to buy that good. Because of this, consumers may 
be able to buy the good at a prevailing market price
 lower than the price they were prepared to pay
. 
You will be familiar with this idea from your own experience, where you would have been prepared to 
pay a certain amount for a holiday or a specific item of clothing, for example, but you have been able to 
buy them at a lower price than you had anticipated. This situation (where the market price is lower than 
the price the consumer was prepared to pay) is called a 
consumer surplus
, 
and it can be represented as 
shown in Figure 9. 
BPP Tutor Toolkit Copy

---

PART A: THE BUSINESS ORGANISATION, ITS STAKEHOLDERS AND THE EXTERNAL ENVIRONMENT 
 
110
 
Price
Quantity
Market
demand
Market
supply
Consumer
surplus
Producer
surplus
P
Q
Figure 9 Consumer surplus and producer surplus 
In the same way that consumers may be able to buy a good for less than they would be prepared to pay, 
so producers may be able to sell a good at a higher price than they would have accepted. 
In this case, there is a producer surplus. Figure 9 illustrates this. The area of producer surplus on the 
graph represents the suppliers in the market who would be prepared to sell quantities of the good at less 
than the market price.