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Producer Surplus

Producer surplus is the difference between what producers are willing to accept for a good or service and the actual price they receive in the market. It represents the extra benefit or profit producers gain from selling at a market price higher than their minimum acceptable price.

In the UK, consider a farmer who is willing to sell apples for £0.30 per apple but manages to sell them at £0.50. The £0.20 difference per apple is the producer surplus. When market prices rise due to high demand or limited supply, producer surplus increases.

A real-world UK example could be British lamb exports. If international demand rises post-Brexit and farmers get a higher price abroad than domestically, their producer surplus increases. Similarly, energy companies may experience increased surplus when electricity prices surge, especially if their production costs remain stable. Producer surplus is a key measure of producer welfare and market efficiency.

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