Figure 2

Consumer and producer surplus without planted forests, and with planted forests. Point A is the equilibrium without utilisation of planted forests, at quantity Q ₀ and price P ₀. Point B is the equilibrium with utilisation of planted forests. The area of triangle ACP ₀ measures the consumers' surplus without utilisation of planted forests, the difference between the total benefits of wood consumption, measured by the area under the demand curve up to Q ₀ and the expenditure on wood, P ₀ × Q ₀. The area of the triangle DAP ₀ is the profit, or producers' surplus, without utilisation of planted forests. This is equal to how much producers get for their wood, P ₀ × Q ₀, minus the cost of production, the area under the supply curve up to Q ₀. The utilisation of planted forests decreases the price of wood to P ₁ and increases consumption and production to Q ₁. Since the demand curve is unchanged, the price decrease and the quantity increase always increase the consumer surplus by the amount measured by the area P ₁ P ₀ AB. At price P ₁, the production from planted forests is Q _f = Q ₁ - Q ₂. Thus, the producer surplus on planted forests is always positive, and equal to the area P ₁ ED, however the surplus of all wood producers (on planted forests or not), measured by the area P ₁ BD, may be higher or lower than without planted forests (area P ₀ AD) depending on the elasticity of supply and demand.