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Economic surplus - Wikipedia, the free encyclopedia Wikipedia (December 2006) - wikipedia2006.classicistranieri.com
Economic surplus
From Wikipedia, the free encyclopedia
This page deals with the various forms of economic surplus, including producer, consumer, government, and
social/total surplus. For information about a budget surplus, see budget deficit.
and
producer (blue) surpluses on a supply and
demand chart"> and
producer (blue) surpluses on a supply and
demand chart" width="350" height="350" longdesc="../../../e/c/o/Image%7EEconomic-surpluses.svg_9227.html" />
Graph illustrating consumer (red) and
producer (blue) surpluses on a supply and
demand chart
The term surplus is
used in economics for several related quantities. The consumer surplus is
the amount that consumers benefit by being able to purchase a product for a price that is
less than they would be willing to pay. The producer surplus is
the amount that producers benefit by selling at a market price that is
higher than they would be willing to sell for. Note that producer surplus flows through to the owners of the factors of production, unlike economic profit which is
zero under perfect competition. If the markets for factors are
perfectly competitive as well, producer surplus ultimately ends up as economic rent to the owners of scarce inputs such as land.
On a standard and
demand">supply and
demand diagram, consumer surplus shows up as a triangle above the price and
below the demand curve, since intramarginal consumers are
paying less
for the item than the maximum that they would pay.
Producer surplus shows up as a triangle below the price and
above the supply curve, since that is
the minimum that a producer can produce that quantity with.
If the government intervenes, using, for example, a tax or
a subsidy, then the graph of supply and
demand becomes more
complicated and
will also include an
area that represents government surplus.
Combined, the consumer surplus, the producer surplus, and
the government surplus (if present) make up the social surplus or
the total surplus. Total surplus is
the primary measure used in Welfare Economics to evaluate the efficiency of a proposed policy.
A basic technique of bargaining for both parties is
to pretend that their surplus is
less than it
really is: sellers may argue that the price they asks hardly leaves them any profit, while customers may play down how eager they are
to have
the article.
Economics is
usually defined as the problem of how best to distribute limited resources, limited because wants are
characterised as unlimited. Surplus economics argues that rather than limited resources, there is
an abundance of resources and
this is
the economic problem. The difference is
one of perspective. If wants are
the focus, then of course resources are
limited, but if needs or
essentials are
used as the foundation, then resources are
seen to be abundant. The difference is
between a description and
an explanation. A focus on wants describes a free market situation, a focus on essentials allows an
explanation of the economy to begin.
An abundance of resources means that not all need to work productively and
that some can use more
resources than others. Who shall be the lucky ones and
how to keep the unlucky quiet is
part of the economic problem. Abundance is
also a problem because having more
resources than is
strictly needed to live presents a danger to the production processes and
the command over resources that created an
economic surplus in the first place.
Surplus economics seeks to answer such questions as: Why does so much waste exist along side of so much poverty?
The orthodox assumption of scarcity has survived even the staggering levels of surplus of modern economies because this assumption suits the needs of those who command resources and
who prefer to ensure that the economy does not become democratised; that unpleasant tasks are
done by someone else, that some win and
many lose.
and
producer (blue) surpluses on a supply
