Final answer:
Producer surplus is the extra benefit received by producers, represented by the area above the supply curve and below the equilibrium price. The supply curve being linear, and the increase in equilibrium price and quantity from last year to this year suggests an increase in producer surplus.
Step-by-step explanation:
The concept of producer surplus reflects the extra benefit that producers receive when they sell a product for more than the minimum they would be willing to accept. Based on the student's question, the supply curve of good X is linear and has experienced an increase in both equilibrium price and quantity due to strong demand.
The change in producer surplus can be visualized as the area above the supply curve but below the new equilibrium price and up to the new equilibrium quantity.
To calculate the change in producer surplus, we compare the area under the price level and above the supply curve before and after the demand increase.
Last year, with an equilibrium price of $10 and quantity of 5 million pounds, the producer surplus was represented by the triangular area under the price of $10 and above the supply curve up to 5 million pounds.
This year, with the new equilibrium price at $12 and a quantity of 7 million pounds, there is a larger triangular area representing the increased producer surplus, under the price of $12 and above the same supply curve up to 7 million pounds. The difference between the two areas represents the increase in producer surplus.