Surplus (In Economics) 2020-01-08 08:00:00

Surplus (In Economics)

A surplus is the amount of an asset or resource that is unused. For example, an inventory surplus occurs when there is unsold inventory. A budget surplus occurs when there is more income than expenses. An economic surplus has two types — consumer and producer.

A consumer surplus occurs when the price of a good or service drops below the maximum price that a consumer will pay. In that case, the consumer can buy the product with cash left over. A producer surplus occurs when the price of a good that is being sold sells for a higher price than was expected by the producer, allowing the producer to make an excess profit. Note that these two scenarios are mutually exclusive — one’s gain is the other’s loss.

 


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