Mathematics of producer surplus wrong?

  • Context: Undergrad 
  • Thread starter Thread starter Nikitin
  • Start date Start date
  • Tags Tags
    Mathematics
Click For Summary
SUMMARY

The discussion centers on the formula for producer surplus, which is defined as Income minus expenses, represented mathematically as P*Q - ∫M(Q)dQ. A key point raised is the inclusion of fixed costs (FC) in the formula, suggesting it should be P*Q - (∫M(Q)dQ + FC) to accurately reflect total costs. The conversation also touches on the nature of marginal costs as derivatives of total costs, emphasizing the importance of considering fixed costs in production calculations. Additionally, the role of demand curves in representing market willingness to purchase is questioned.

PREREQUISITES
  • Understanding of producer surplus and its calculation
  • Familiarity with marginal cost and total cost concepts
  • Knowledge of calculus, specifically integration and differentiation
  • Basic economic principles regarding demand curves
NEXT STEPS
  • Research the implications of fixed costs on producer surplus calculations
  • Study the relationship between marginal costs and total costs in production
  • Learn about the mathematical derivation of demand curves in economics
  • Explore advanced topics in economic surplus analysis
USEFUL FOR

Economists, financial analysts, students of economics, and anyone involved in production cost analysis will benefit from this discussion.

Nikitin
Messages
734
Reaction score
27
The formula for producer surplus is:

Income - expenses = P*Q - ∫M(Q)dQ

However, shouldn't it be P*Q - (∫M(Q)dQ + FC), with FC= fixed costs?

I mean, the marginal costs are just the derivative of total costs, and thus integrating them is the same as just integrating the variable costs, ignoring the fixed costs of production.
 
Last edited:
Mathematics news on Phys.org
And concerning demand-curves:

Do they represent the quantity the market is willing to buy?
 

Similar threads

Replies
3
Views
2K
  • · Replies 1 ·
Replies
1
Views
1K
  • · Replies 1 ·
Replies
1
Views
3K
  • · Replies 8 ·
Replies
8
Views
2K
  • · Replies 31 ·
2
Replies
31
Views
9K
  • · Replies 10 ·
Replies
10
Views
3K
  • · Replies 4 ·
Replies
4
Views
2K
  • · Replies 1 ·
Replies
1
Views
3K
  • · Replies 33 ·
2
Replies
33
Views
4K
  • · Replies 5 ·
Replies
5
Views
2K