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 buys a product, the profit they make is the consumer surplus. Instead, if someone sells a product or service, it is the producer's profit.
Consumer surplus
The law of 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 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. He goes to the store and checks that the shoes he wants are on sale and their price is $ 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 a general rule, 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 and the pot is sold for $ 18. This implies that the producer surplus in this case is $ 8.
The origin of the surplus
When the human being begins an agricultural activity in the Neolithic, he can already produce much more than he consumes. That difference is precisely the surplus.
In this way, the surplus grain that was collected could serve as an element of trade and exchange with other populations. In this sense, agricultural surpluses are considered to be the true origin of the first civilizations.
Photos: Fotolia - eljule / freshidea
