Saturday, July 28, 2018

Surplus in the economy

The combined surplus benefits enjoyed by both the consumers and the producers is known as economic surplus. It is the case in which consumers and producers both enjoy the maximum financial benefits from buying and selling of goods. The point at which there is a stable price for a good in the economy so that the consumer and the producer both enjoy maximum surplus is known as market equilibrium .
Consumer Surplus
If a consumer is prepared to pay as much as 300 rupees for a book but is able to get it at 240 rupees she pays 60 rupees less, this difference between the price that he is willing to pay and the price that he actually pays is  called consumer surplus. Each consumer has a different surplus since the maximum price each person is prepared to pay for a product differs but the product is offered at the same price to everyone .
Producer Surplus
Similarly there is a concept of producer surplus. Let's say a producer is willing to sell a book at 400 rupees but sells it at 450 rupees ,the difference will be called  producers surplus .Each producer has a different surplus since it has a different manufacturing cost . Hence ,each producers surplus is different.

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