Does increasing producer surplus reduce consumer surplus? Looking at the graph below?
Decreasing consumer surplus does *often* correspond to increasing producer surplus. However, it’s not always proportional and it may not always be the case. There is the possibility of market interventions such as price controls, taxes, or subsidies, meaning that surplus is not always transferred directly from producer to consumer (or vice versa). There may also be deadweight loss involved, which is linked with an incomplete transfer of surplus. ________________ Edit: I’ve done a very quick diagram in Paint to show what you’re looking for. The diagram’s here: http://img109.imageshack.us/img109/8073/… The graph on the left shows the equilibrium market outcome (it’s a very rough diagram so just bear in mind that the axes and demand and supply lines are the same on both). The consumer surplus is blue and producer surplus is red. On the right graph, the company has increased its prices to increase profits. In
