Economic surplus
Concept in economics / From Wikipedia, the free encyclopedia
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This article is about consumers' and producers' surplus. For information about other surpluses, see Surplus.
In mainstream economics, economic surplus, also known as total welfare or total social welfare or Marshallian surplus (after Alfred Marshall), is either of two related quantities:
- Consumer surplus, or consumers' surplus, is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.
- Producer surplus, or producers' surplus, is the amount that producers benefit by selling at a market price that is higher than the least that they would be willing to sell for; this is roughly equal to profit (since producers are not normally willing to sell at a loss and are normally indifferent to selling at a break-even price).[1][2]
The sum of consumer and producer surplus is sometimes known as social surplus or total surplus; a decrease in that total from inefficiencies is called deadweight loss.[3]