At the market equilibrium (Market Equilibrium), most buyers would have paid more than the price, and most sellers would have sold for less. Those gaps are gains from trade, and on a graph they are areas, often triangles (Area of a Triangle).
Key idea
Consumer surplus is the total of what buyers were willing to pay minus what they paid: the area below the demand curve and above the price, out to the quantity traded. Producer surplus is the total of the price minus the least each seller would accept: the area above the supply curve and below the price. With straight lines at equilibrium, each is a triangle: $\tfrac{1}{2} \times Q^* \times$ (the height between the price and the curve's intercept).
Why it works
Line buyers up from the most eager to the least: the height of the demand curve at each quantity is what that buyer would pay for that unit. A buyer who would pay \$9 and pays \$6 gains \$3. Add those gains over every unit bought and you get the area between the demand curve and the price. The supply curve works the same way, because its height at each quantity is the lowest price that would get that unit sold, the seller's marginal cost.
Worked example: Counting buyer by buyer
Five buyers would pay at most \$10, \$8, \$7, \$5 and \$3 for one ticket each. The price is \$6. Find consumer surplus.
- Only buyers whose willingness to pay is at least \$6 buy: the \$10, \$8 and \$7 buyers.
- Their gains: $\$10 - \$6 = \$4$, $\$8 - \$6 = \$2$, $\$7 - \$6 = \$1$.
- Consumer surplus: $\$4 + \$2 + \$1 = \$7$.
Answer: \$7.
Worked example: Triangles from equations
$Q_d = 20 - 2P$ and $Q_s = -4 + 2P$, so the equilibrium is \$6 and 8 units. Find consumer and producer surplus.
- Demand meets the price axis at \$10 (set $Q_d = 0$); supply starts at \$2 (set $Q_s = 0$).
- $CS = \tfrac{1}{2} \times 8 \times (\$10 - \$6) = \$16$.
- $PS = \tfrac{1}{2} \times 8 \times (\$6 - \$2) = \$16$.
Answer: $CS = \$16$ and $PS = \$16$.
Common mistake
Confusing consumer surplus with spending. Buyers spend $\$6 \times 8 = \$48$; that's a rectangle under the price, and it is a transfer to sellers, not a gain. Consumer surplus is the triangle above the price. Also measure the triangle out to the quantity actually traded, not to where demand meets the axis. Check: surplus areas sit between a curve and the price line, and stop at the traded quantity.