The individual producer is thus a price taker. The stock market and the grain market are both good examples of competitive markets. We use this to study the equilibrium in market, and to study comparative statics. The equilibrium concept is very important in economics. The concepts of consumer and producer surplus are very important too, because they enable us to measure welfare in the market.
Consumer surplus represents the dollar value gained by buyers due to a market's existence.
This is typically depicted in a diagram as the area under the demand curve but above the price line, over to the equilibrium quantity. Similarly, producer surplus measures how well off sellers are due to a market's existence. Specifically, producer surplus is revenue earned over and above the variable cost of production. In a diagram it is typically measured as the area below the price line but above the supply curve, over to the equilibrium quantity. Comparative statics means comparing the change in equilibrium quantity and price when some other underlying condition in a market changes.