ECONOMIC SURPLUS Meaning and
Definition
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Economic surplus refers to the positive difference between the value individuals are willing to pay for a good or service and the actual price they pay in a given market. Also known as consumer surplus or economic welfare, this surplus represents the net gain or benefit gained by consumers when they are able to purchase a good or service at a price lower than what they were willing to pay.
The concept of economic surplus is based on the principle that individuals have different valuations and preferences for a given product. When the actual price of the product is lower than what consumers are willing to pay, they experience a surplus. This surplus can be quantified by calculating the difference between what consumers were willing and able to pay, and what they actually paid.
Economic surplus does not only apply to consumers but can also be observed for producers. When the actual price of a good or service is higher than the cost of production, producers receive a surplus. This surplus represents the additional profit earned by producers due to the higher price.
Overall, economic surplus indicates the overall welfare and economic benefit of a market transaction. It represents the value created when there is a match between consumer demand and producer supply, resulting in a situation where both parties experience a surplus.
Etymology of ECONOMIC SURPLUS
The word "economic" is derived from the Greek word "oikonomia", which means "household management" or "administration of a household". It combines the terms "oikos" (meaning "house") and "nomos" (meaning "law" or "management").
The term "surplus" has its origins in Latin, deriving from the word "superplus", which means "remaining" or "excessive". It is a combination of the prefix "super-" (meaning "over" or "above") and the word "plus" (meaning "more").
When combined, the term "economic surplus" refers to the excess or additional value generated in an economy, where the output or benefits exceed the input or costs. It is a concept commonly used in economics to describe the positive difference between what is produced and what is necessary for production or consumption.
