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The little bee reviewed the theory of demand, including changes in demand and changes in demand. Let's review consumer surplus and producer surplus today.

trade equilibrium

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Still looking at the picture above, those above the trading equilibrium point are willing to buy at a higher price, but in fact they only bought at a price of 1. So they got unexpected benefits.

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This excess of their expected price is producer surplus, which is shaded red on the graph:

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exchange

Let's take a look at the situation after the exchange joins.

The exchange charges transaction fees to both parties. For buyers, due to the increase in transaction costs, the quantity demanded will decrease at the same price level, so the demand curve shifts to the right. In the diagram below, the demand curve shifts from demand curve 1 to demand curve 2.

Look at the seller again. The seller also has to pay a handling fee to the exchange, so in the case of the same sales volume, the seller needs a higher selling price to make up for the handling fee. That is, the supply curve shifts upward, from supply curve 1 to supply curve 2 on the graph.

In this case, since the demand curve and the supply curve both move to the left, the transaction equilibrium point naturally also moves to the left. Point Z on the diagram.

Because the up and down gap between the front and back demand curves and the front and back supply curves is the price difference, which is essentially the transaction fee. And point Z is the actual trading volume. So the orange shaded part in the picture above. This part is the exchange income.

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loss of welfare

Although the welfare of both parties to the transaction has been converted into the income of the exchange, have you noticed that there is still a piece missing:

It is the green shaded part on the picture, and this part of the benefits will be lost.