Consumer & Producer Surplus
in Competitive Market

Market equilibrium at MC and MB intersection → where equilibrium price is Pe → consumers pay Pe for every unit purchased → some consumers were willing to pay more than Pe → difference between willingness to pay and actual price is consumer surplus

Market equilibrium at MC and MB intersection → where equilibrium price is Pe → producers receive Pe for every unit sold → some producers were willing to supply at a lower price than Pe → difference between the price received and the minimum acceptable price is producer surplus

Market reaches competitive equilibrium when consumer surplus & producer surplus is maximized given the equilibrium price Pe → consumer surplus + producer surplus = total surplus → resources are allocated efficiently and social welfare is maximized