Definition of Economic Surplus

The term we are analyzing is very common in the economic sphere. In simple terms, we could define surplus as the amount of something left over. If someone purchases a product, the gain you get is the consumer surplus. On the other hand, if someone sells a product or service, it is the producer's profit.

Consumer surplus

The law supply and demand is the general framework on which the prices of products and goods are established. Demand is the price that consumers are willing to pay for a product. Thus, the price that a consumer would be willing to pay, but that he has not paid because the product is cheaper, is the consumer surplus. It should be noted that this type of surplus allows the welfare of consumers to be established. On the other hand, it is directly related to the evolution Of demand.

Let's imagine that a young man wants to buy some running shoes and is willing to pay $ 120. Go to establishment and he checks that the shoes he wants are on sale and are priced at $ 80. This means that the youth has a consumer surplus of $ 40.

Producer surplus

The difference between the selling price of a product and the lowest price that the producer would be willing to put up for sale is the producer's surplus. In other words, the producer surplus is the difference between the final price that is put up for sale and the cost of the product.

Therefore, this type of surplus is actually the seller's profit. It should be noted that, as rule Generally, no producer sells anything below the cost price of the product. On the other hand, this surplus is directly related to the evolution of supply.

Suppose an artisan makes a pot at a cost of production that reaches 10 dollars and the pot sells for 18 dollars. This implies that the producer surplus in this case is $ 8.

The origin of the surplus

When the human being begins an activity agricultural in the neolithic, you can already produce much more than you consume. That difference is precisely the surplus.

In this way, the surplus grain that was collected could serve as an element of commerce and exchange with other populations. In this sense, agricultural surpluses are considered to be the true origin of the first civilizations.

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