Just as consumer surplus is closely related to the demand curve, producer surplus
is closely related to the supply curve. To see how, let’s continue our example.
We begin by using the costs of the four painters to find the supply schedule for
painting services. Table 7-4 shows the supply schedule that corresponds to the
costs in Table 7-3. If the price is below $500, none of the four painters is willing to
do the job, so the quantity supplied is zero. If the price is between $500 and $600,
only Grandma is willing to do the job, so the quantity supplied is 1. If the price is
between $600 and $800, Grandma and Georgia are willing to do the job, so the
quantity supplied is 2, and so on. Thus, the supply schedule is derived from the
costs of the four painters.
Figure 7-4 graphs the supply curve that corresponds to this supply schedule.
Note that the height of the supply curve is related to the sellers’ costs. At any quantity,
the price given by the supply curve shows the cost of the marginal seller, the