{"id":4455,"date":"2015-12-04T18:43:32","date_gmt":"2015-12-04T18:43:32","guid":{"rendered":"https:\/\/courses.candelalearning.com\/microxwaymakerxspring2016\/?post_type=chapter&p=4455"},"modified":"2016-06-20T23:58:39","modified_gmt":"2016-06-20T23:58:39","slug":"why-it-matters-surplus","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-microeconomics\/chapter\/why-it-matters-surplus\/","title":{"raw":"Why It Matters: Surplus","rendered":"Why It Matters: Surplus"},"content":{"raw":"

Why use the concept of producer, consumer surplus, and total surplus to explain the outcomes of markets for individuals, firms, and society?<\/h2>\r\nStudents often see this topic on surplus as technical, but it\u2019s really fundamental to understanding economics if you realize what it\u2019s about. Economists believe that voluntary transactions (purchases and sales) are mutually beneficial. It is not the case that one side gains and the other side loses. Rather, transactions are positive sum games in which both parties are better off as a result. In principle, we can measure the gains to both parties. This measurement is the rationale for two important concepts: consumer surplus and producer surplus, which together make up economic (or social) surplus\u2014the gain to society from the transaction. This is the subject of this module.\r\n\r\n[caption id=\"attachment_1890\" align=\"alignright\" width=\"285\"]\"Image<\/a> Sale Image<\/a>\u00a0by Tim Parkinson, CC-BY<\/a>.[\/caption]\r\n\r\nSurplus, in the context of this module, just means how good a deal a consumer got on a purchase, or how good a deal a producer got on a sale. That\u2019s it in a nutshell.\r\n\r\nFor consumers, this is often highlighted by a sale when deals become bigger. Sales promotions bring in customers who wouldn\u2019t pay the normal price. But they also allow customers who would have purchased anyway to get an even better deal. Watch this BBC video about Cyber Monday to find out more about how consumers react to large\u00a0sales.\r\n\r\nhttps:\/\/www.youtube.com\/embed\/Md2rmHPJATw\r\n\r\nHow big a deal do consumers get together from Cyber Monday? We can answer this question by computing the consumer surplus.\r\n\r\nWhat about businesses? Why do they run sales like Cyber Monday, and how much do they gain from them? The answer can be found by computing the producer surplus.\r\n\r\nLet\u2019s see how it\u2019s done.\r\n