Surplus in Economics: Definition & Overview

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  • 0:00 Types of Surplus Defined
  • 1:54 Economic Surplus
  • 2:33 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

A surplus is often a good thing in economics. In this lesson, you'll learn what an economic surplus is and some related concepts. You'll also have a chance to reinforce your knowledge with a short quiz after the lesson.

Types of Surplus Defined

An economic surplus is the aggregate of consumer surplus and producer surplus in a market transaction. Whew! Let's go through that piece by piece, shall we?

First off, consumer surplus is the difference between what consumers are willing to pay for a good or service and what consumers actually pay for it. If someone is willing to buy a blender for $100, but they are able to find the product they want for only $80, that extra $20 that they were willing to put toward the blender is the consumer surplus.

Secondly, producer surplus is the difference between the price at which a producer is willing to sell a good or service and the price at which the good or service is actually sold. Generally speaking, a producer will sell a good or service no lower than the cost of producing it so long as the producer is not distressed. Consequently, the producer surplus is the profit the producer makes on a product, which is the difference between the cost of production and the sale price.

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